Chapter 11 Financial Planning Exercise 2 Assume that the following quote for Mer
ID: 2792009 • Letter: C
Question
Chapter 11
Financial Planning Exercise 2
Assume that the following quote for Merck, a NYSE stock, appeared on August 1, 2012 (Wednesday) on Yahoo! Finance (http://finance.yahoo.com/q?s=MRK&ql=0):
Merck & Co. Inc. (MRK) - NYSE
44.56 0.39(0.88%) 1:34PM EDT
Prev Close: 44.17 Day's Range: 44.25 - 44.79
Open: 44.45 52wk Range: 29.47 - 45.17
Bid: 44.62 x 6900 Volume: 5,345,943
Ask: 44.63 x 1400 Avg Vol (3m): 15,788,300
1y Target Est: 45.69 Market Cap: 135.74B
Beta: 0.43 P/E (ttm) 20.44
Next Earnings Date: N/A EPS (ttm): 2.18
Div & Yield: 1.68 (3.80%)
Given this information, answer the following questions.
At what price did the stock sell at the time of the quote?
$
What is the stock's price/earnings ratio?
What does that indicate? Round your answers to the nearest whole number.
This means that investors are willing to pay more than $ for every $1 of earnings per share that the company generated last year.
What is the last price at which the stock traded on the prior trading day?
$
What's the stock's dividend yield?
%
What are the highest and lowest prices at which the stock traded during the latest 52-week period?
Highest price $
Lowest price $
How large is the market capitalization of the company?
$ billion
Explanation / Answer
At what price did the stock sell at the time of the quote?
$ 44.63
What is the stock's price/earnings ratio?
MPS/EPS = 20.38 Times
44.45/2.18
indication-
The price-earnings ratio indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings. This is why the P/E is sometimes referred to as the price multiple because it shows how much investors are willing to pay per dollar of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is willing to pay $20 for $1 of current earnings.
What is the last price at which the stock traded on the prior trading day?
$ 44.79
What's the stock's dividend yield?
% 77.06
DPS/EPS
1.68/2.18
What are the highest and lowest prices at which the stock traded during the latest 52-week period?
Highest price $ 44.79
Lowest price $ - 29.47
How large is the market capitalization of the company?
$ billion 135.74
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