One danger of EBIT-EPS analysis is that it ignores the implicit cost of debt financing.
Indicate whether the statement is true or false
Question 2
Stanley Company pays out 35 of its annual earnings to its common shareholders in the form of a dividend. Earnings per share are expected to be 3.25 at the end of this year and are expected to grow at 2 per annum perpetually.
If you require a return of 8 on this investment, how much are you willing to pay for the stock?
A) 18.96
B) 19.34
C) 43.55
D) 54.17
E) 55.25
Question 3
Suppose you invest 2,000 today, compounded monthly, with an annual interest rate of 7.50. What is your investment worth in one year?
A) 2,150.00
B) 2,152.81
C) 2,155.27
D) 2,154.77
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GENETIC ANALYSIS 15.1 (2 of 5)