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QUESTION 31 The following financial information is given for Du Pont and Dow for fiscal year...

QUESTION 31

  1. The following financial information is given for Du Pont and Dow for fiscal year 2001:

    Du Pont

    Dow

    Closing Stock Price, Feb. 15, 2002

    44.90

    30.57

    EPS (actual for 2001)

    4.50

    -0.46

    EPS (forecast for 2002)

    1.60

    0.52

    Dividend per share

    1.40

    1.34

    5 year forecast earnings growth rate

    10.2%

    10.0%

    Intrinsic value per share

    103.84

    33.38

    Given the Feb. 15 stock prices, Du Pont & Dow have PE ratios (based on year-ahead EPS forecast) of:

    a.

    28.06 & 58.79, respectively
    b.

    9.98 & 58.79, respectively
    c.

    28.06 & 66.46, respectively
    d.

    32.07 & 22.81, respectively

  2. Following Question 31, given the Feb. 15 stock prices, Du Pont & Dow have dividend yields of:

    a.

    13.72% & 13.40%, respectively
    b.

    3.56% & 1.70%, respectively
    c.

    3.12% & 4.38%, respectively
    d.

    31.11% & 2.58%, respectively

  3. Following Question 31, given the Feb. 15 stock prices, PE based on actual EPS & 5-year-ahead earnings forecast, Du Pont has a PEG of:

    a.

    3.14
    b.

    0.98
    c.

    4.40
    d.

    2.75

  4. Following Question 31, based on PEG, which company seems to be the better investment opportunity?

    a.

    Dow because of the very high PEG
    b.

    Du Pont because of the very high PEG
    c.

    Dow because the PEG is less than the benchmark cutoff of 1
    d.

    Du Pont because the PEG is less than the benchmark cutoff of 1

  5. Following Question 31, based on intrinsic value to share price, Du Pont and Dow are:

    a.

    Du Pont is undervalued but Dow is overvalued
    b.

    Both are undervalued
    c.

    Du Pont is overvalued but Dow is undervalued
    d.

    Both overvalued

Solutions

Expert Solution

ekkarill92 answered 2 hours ago
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