Name _______________________

Chapter 14 – Problems for Students
Hint: Use Textbook page 518-519 as a resource for formulas if needed.

Calculating Dividend Amounts. Betty and John Martinez own 180 shares of McDonald’s common stock. McDonald’s annual dividend is $4.04 per share. What is the amount of the dividend check the Martinez couple will receive for this year?

Annual dividend = 



2.  Determining the Number of Shares after a Stock Split. In March, stockholders of Herbalife Nutrition Corporation approved a 2-for-1 stock split. After the split, how many shares of Herbalife stock will an investor have if she or he owned 160 shares before the split?



3. Calculating Total Return. Tammy Jackson purchased 100 shares of All-American Manufacturing Company stock at $31.50 a share. One year later, she sold the stock for $38 a share. She paid her broker a $15 commission when she purchased the stock and a $29 commission when she sold it. During the 12 months she owned the stock, she received $160 in dividends. Calculate Tammy’s total return on this investment.

Current Return =  

Purchase Price = 

Selling Price =  

Capital gain = 

Total Return =  

4.   Determining a Preferred Dividend Amount. James Hayes owns 370 shares of Ohio Utility preferred stock. If this preferred stock issue pays $1.90 per share each year, what is the total dollar amount Mr. Hayes will receive in one year?

 


5.  Calculating Dividend Payout.  Assume you own shares in Walmart and that the company currently earns $3.28 per share and pays annual dividend payments that total $2.08 a share each year. Calculate the dividend payout for Walmart.

Dividend payout = Dividend amount		=  
                              Earnings per share	   

   




6.   Compounding Investment Returns.  Nancy Cardoza invested $2,450 in ExxonMobil stock because her research indicated the company should average an 8 percent return for investors over the next 4 years.   If ExxonMobil investors do earn 8 percent each year, what will her $2,450 investment be worth at the end of four years?  (To solve this problem, you may want to use the formulas or tables in Exhibit 1-A in the appendix that follows Chapter 1 or use a future value calculator available on various websites.)

 

Ms. Cardoza's investment will be worth:  


7.   Compounding Dividend Amounts.  Carl Patterson likes investing in stocks that pay dividends.  Carl owns 60 shares of a local utility company.  The stock pays a regular annual dividend in the amount of
$3.50 per share, and the company has indicated that the dividend will stay the same for a long time.  If
Carl reinvests his dividends each year and the dividends earn a return of 6 percent each year, how much will Carl accumulate in 15 years?  (To solve this problem, you may want to use the formulas or tables in Exhibit 1-B in the appendix that follows Chapter 1 or use a future value calculator available on different websites.)

 
Carl's investment will be worth:  


8.  Calculating Earnings Per Share, Price-Earnings Ratio, and Book Value. As a stockholder in Bozo
Oil Company, you receive its annual report. In the financial statements, the firm has reported assets of
$9 million, liabilities of $5 million, after-tax earnings of $2 million, and 750,000 outstanding shares of common stock.  

a.    Calculate the earnings per share of Bozo Oil’s common stock.


After Tax Income ÷ Number of Shares Outstanding = EPS

 

                                 



b.   Assuming that a share of Bozo Oil’s common stock has a market value of $40, what is the firm’s
price-earnings ratio?

        Price per share ÷ Earnings per share = P/E Ratio