Financial Goals and Corporate Governance Homework
Q1. Stock Returns - If the share price of ABC Company rises from $12 to $15 over a one-year period, what is the rate of return to the shareholder given each of the following:
1) The company paid no dividends.
2) The company paid a dividend of $1 per share at the end of the year.
Q2. Carty's Choices - Brian Carty, a prominent investor, is evaluating investment alternatives. If he believes an individual equity will rise in price from $59 to $71 in the coming one-year period, and the share is expected to pay a dividend of $1.75 per share, and he expects at least a 15% rate of return on an investment of this type, should he invest in this particular equity? Please explain.
Q3. Vaniteux's Returns (A). Spencer Grant is a New York-based investor. He has been closely following his investment in 100 shares of Vaniteux, a French firm that went public in February 2010. When he purchased his 100 shares at €17.25 per share, the euro was trading at $1.360/€. Currently, the share is trading at €28.33 per share, and the dollar has fallen to $1.4170/€.
1) If Spencer sells his shares today, what percentage change in the share price would he receive (that is, the return in €)?
2) What is the percentage change in the value of the euro versus the dollar over this same period?
3) What would be the total return (that is, the return in $) Spencer would earn on his shares if he sold them at these rates?