Assignment:
Answer the following questions using the provided date table in complete 2-3 double-spaced pages in length. Give real-world examples whenever possible. Please show all of your work, including all formulas used, if the question requires calculations.
Combining information from the S&P reports and some estimated data, the following calendar-year data, on a per-share basis, are provided:
|
Year
|
Price Range Low High
|
Earnings
|
Dividends
|
Book
Value
|
(D/E)
100(%)
|
Annual
Avg. P/E
|
ROE =
E/Book
TR%
|
|
1999
|
$26.5-$35.3
|
$4.56
|
$1.72
|
$25.98
|
37.7
|
7.0
|
17.6%
|
|
2000
|
28.3-37.0
|
5.02
|
1.95
|
29.15
|
38.8
|
6.2
|
17.3
|
|
2001
|
23.5-34.3
|
5.14
|
2.20
|
32.11
|
42.8
|
5.8
|
16.0
|
|
2002
|
27.8-35.0
|
4.47
|
2.20
|
30.86
|
|
7.7
|
|
|
2003
|
29.0-47.8
|
5.73
|
2.30
|
30.30
|
|
6.8
|
|
|
2004
|
36.6-53.5
|
6.75
|
2.40
|
39.85
|
|
|
|
|
2005
|
|
6.75
|
2.60
|
44.00
|
|
|
|
Use the table above and write the calculations that demonstrate the values requested.
a. Calculate the D/E, ROE, and TR for 2002, 2003, and 2004. (Use the average of the low and high prices to calculate TRs.)
b. Show that from 2000 through 2004 the per annum growth rate in dividends was 6.9 percent and for earnings was 8.2 percent.
c. Using the current price of $47, with estimated earnings for 2005 of $6.75, show that the P/E would be evaluated as 6.96.
d. On the basis of the annual average P/E ratios shown above and your estimate in Problem c, assume an expected P/E of 7. If an investor expected the earnings of GF for 2005 to be $7.50, show that the intrinsic value would be $52.50.