Beruflich Dokumente
Kultur Dokumente
$240 million
$115 million
$25 million
$100 million
$22.5 million
1 million shares
10 million shares
$2/share
$0.75/share
$30.75/share
$25.00/share
2.
3.
Year
2007
2008
2009
2010
2011
Expected
EPS
$3.25
3.40
3.90
4.40
5.00
Expected Dividend
Payout Ratio
40%
40
45
45
45
The stock currently trades at $60 per share. Al thinks that within 5 years it should be
trading at around $75 to $80 a share. Wally realizes that to buy the Hydro-Electric
stock, he will have to sell his holdings of CapCo Industries - a highly regarded
growth stock that Wally is disenchanted with because of recent substandard
performance.
Questions:
a. How would you describe Wally's present investment program? How do you think
it fits him and his investment objectives?
b. Consider the Hydro-Electric stock.
1. Determine the amount of annual dividends Hydro-Electric can be expected to
pay over the years 2007 to 2011.
2. Compute the total dollar return that Wally will make from Hydro-Electric if he
invests $6,000 in the stock and all the dividend and price expectations are
realized.
2
Liquidity
a. Net working capital
b. Current ratio
Latest Industry
Averages
Profitability
N/A
h. Net profit margin
1.95
i. ROA
j. ROE
Activity
c. Receivables turnover
d. Inventory turnover
e. Total asset turnover
5.95
4.50
2.65
Leverage
f. Debt-equity ratio
g. Times interest earned
0.45
6.75
Latest Industry
Averages
8.5%
22.5%
32.2%
$2.00
20.0
$1.00
2.5%
50.0%
$6.25
6.4
1. Compare the company ratios you prepared to the industry figures given in part a.
What are the company's strengths? What are its weaknesses?
2. What is your overall assessment of South Plains Chemical? Do you think Jack
should continue with his evaluation of the stock? Explain.