Goodman Industries Year Stock Price Dividend 2013 $25.88 $1.73 2012 $22.13 $1.59

Question

Goodman Industries Year Stock Price Dividend 2013 $25.88 $1.73 2012 $22.13 $1.59 2011 $24.75 $1.50 2010 $16.13 $1.43 2009 $17.06 $1.35 2008 $11.44 $1.28

Landry Incorporated Year Stock Price Dividend 2013 $73.13 $4.50 2012 $78.45 $4.35 2011 $73.13 $4.13 2010 $85.88 $3.75 2009 $90.00 $3.38 2008 $83.63 $3.00

Market Index: Year Includes Dividends 2013 17495.97 2012 13178.55 2011 130919.97 2010 9651.05 2009 8403.42 2008 7058.96

1. Use the data given to calculate annual returns for Goodman, Landry, and the Market Index, and then calculate average annual returns for the two stocks and the index. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and then dividing the result by the beginning price. Assume that dividends are already included in the index. Also, you cannot calculate the rate of return for 2008 because you do not have 2007 data.)

Explanation / Answer

Annual return = [(Sp - Cp) + D ] / Cp

Goodman Industries

2013 = [(25.88 - 22.13) + 1.73] / 22.13 = 24.76

2012 = [(22.13 - 24.76) + 1.59] / 24.75 = -4.2

2011 = [(24.75 - 16.13) + 1.50 ]/ 16.13 = 62.74

2010 = [(16.13 - 17.06 )+ 1.43 ]/ 17.06 = 2.93

2009 = [(17.06 - 11.44) + 1.35 ]/ 11.44 = 60.93

Average annual return = [24.76 + (-4.2) + 62.74 + 2.93 + 60.93] / 5

= 29.43

Landry Stock

2013 = [(73.13 - 78.45) + 4.50] / 78.45 = -1.05

2012 = [(78.45 - 73.13) + 4.35] / 73.13 = 13.22

2011 = [(73.13 - 85.88) + 4.13 ]/ 85.88 = -10.04

2010 = [(85.88 - 90.00)+ 3.75]/ 90 = -0.41

2009 = [(90.00 - 83.63) + 3.38 ]/ 83.63 = 11.66

Average annual return = [(-1.05) + 13.22 + (-10.04) + (-0.41) + 11.66] / 5

= 2.68

Market Index:

2013 = (17495.97 - 13178.55) / 13178.55 = 0.328

2012 = (13178.55 - 130919.97) / 130919.97 = -0.9

2011 = (130919.97 - 9651.05) / 9651.05 = 12.57

2010 = (9651.05 - 8403.42)/ 8403.42 = 0.148

2009 = (8403.42 - 7058.96) / 7058.96 = 0.19

Average annual return = [0.328+ (-0.9) + 12.57 + 0.148 + 0.19] / 5

= 2.47

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