1. Universal Air is a no-growth firm and has two million shares outstanding. It expects to earn a constant $15 million per year on its assets. If it has no debt, all earnings are paid out as dividends, and the cost of capital is 12 percent, calculate the current price per share of the stock.
2. What do you think? If most investment decisions are based on fundamental financial analysis, what happens if the information provided is not accurate? What safeguards do U.S. investors have when it comes to trusting in quarterly and/or annual reports?
3. Assume General Electric (GE) has about 12.2 billion shares outstanding and the stock price is $42.30. Also, assume the P/E ratio is about 17.5x. Calculate the approximate market capitalization for GE.