1. A company has annual net income of $5 million, 1 million shares outstanding, and trades for 15 times earnings. The company then splits its shares 2-for-1. What is its earnings per share (EPS) after the split?
(a) $2.50 (b) $5.00 (c) $10.00 (d) $15.00
2. If you graph CAPM (Beta on the x-axis/independent variable and the expected return on the y- axis/dependent variable), this line is called
(a) Beta line (b) Sharpe Ratio (c) Security Market Line (d) Capital Market Line
3. A company has a market capitalization of $1,000,000 and 100,000 common shares outstanding. The company has annual net income of $125,000. What is the company’s P/E ratio?
(a) 8.0x (b) 10.0x (c) 0.1x (d) 12.5x v