# Finance questions

**sar.de**

4 finance questions listed below. Please complete in excel showing all work.

10-21 You purchased 200 shares of H2O Corporation stock at a price of

$20. Consider each of the following announcements separately. What

will the price of the stock be after each change? How many shares will

you own? What will be the total value of your holdings (value of stock

plus any income)?

a. The firm announces a 10 percent stock dividend.

b. The firm announces a two-for-one stock split .

c. The firm announces a $0.50 per share dividend (in your

answer use the price of the stock on the ex-dividend date).

d. The firm announces it will repurchase 10 percent of its shares;

you do not offer to sell any of your shares.

10-24 The Lo Company earned $2.60 per share and paid a dividend of

$1.30 per share in the year just ended. Earnings and dividends per

share are expected to grow at a rate of 5 percent per year in the future.

Determine the value of the stock:

a. if the required rate of return is 12 percent.

b. if the required rate of return is 15 percent.

c. Given your answers to (a) and (b), how are stock prices

affected by changes in investor’s required rates of return?

10-25 The French Thaler and Company’s stock has paid dividends of

$1.60 over the past 12 months. Its historical growth rate of dividends

has been 8 percent, but analysts expect the growth to slow to 5 percent

annually for the foreseeable future.

a. Determine the value of the stock if the required rate of return

on stocks of similar risk is 15 percent.

b. If analysts believe the risk premium on the stock should be

reduced by 2 percentage points, what is the new required rate of

return on French Thaler and Company stock? How much should

its price change from the answer you computed in part (a)?

11-4 You purchased shares of Broussard Company using 50 percent

margin; you invested a total of $20,000 (buying 1,000 shares at a price

of $20 per share) by using $10,000 of your own funds and borrowing

$10,000. Determine your percentage profit or loss under the following

situations (ignore borrowing costs, dividends, and taxes). In addition,

what would the percentage profit and loss be in these scenarios if

margin were not used?

a. the stock price rises to $23 a share

b. the stock price rises to $30 a share

c. the stock price falls to $16 a share

d. the stock price falls to $10 a share

- 7 years ago
- 20

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