Question: 1. Compute Fox Company's price-earnings ratio if its common stock has a market value of $30.75 per share and its EPS is $4.10. Would an analyst likely consider this stock potentially over- or underpriced? Explain.
2. Fiona Company expects to pay a $2.10 per share cash dividend this year on its common stock. The current market value of Fiona stock is $28.50 per share. Compute the expected dividend yield on the Fiona stock. Would you classify the Fiona stock as a growth or an income stock? Explain.