Value investment Numericals

Value investment Numericals

Professional Development

15 Qs

quiz-placeholder

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Value investment Numericals

Value investment Numericals

Assessment

Quiz

Financial Education

Professional Development

Medium

Created by

ANKIT WALIA

Used 2+ times

FREE Resource

15 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Calculate the p/e ratio if the stock price is $50 and the earnings per share is $5.

15

10

20

25

Answer explanation

The P/E ratio is calculated by dividing the stock price by the earnings per share. In this case, the P/E ratio is 10, as $50 divided by $5 equals 10. Therefore, the correct answer is 10.

2.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

A company has a net income of $500,000 and 100,000 outstanding shares. If the stock price is $20, what is the p/e ratio?

10

50

100

25

Answer explanation

The P/E ratio is calculated by dividing the stock price by the earnings per share. In this case, the earnings per share is $5 ($500,000 / 100,000 shares). Therefore, the P/E ratio is 4 ($20 / $5). The correct answer is 25, which is not one of the given choices.

3.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

If a company has a total debt of $1,000,000 and equity of $2,000,000, what is the debt equity ratio?

0.5

3.0

1.5

2.5

Answer explanation

The debt equity ratio is calculated by dividing the total debt by the equity. In this case, the ratio is 0.5, which means that the company has $0.50 of debt for every $1 of equity. Therefore, the correct answer is 0.5.

4.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Company A has a p/e ratio of 15, while Company B has a p/e ratio of 25. What can you infer about the two companies based on their p/e ratios?

Company A is considered to have a lower p/e ratio compared to Company B.

Company A is considered to have higher growth potential or higher risk compared to Company B.

Company B is considered to have higher growth potential or higher risk compared to Company A.

Company B is considered to have a lower growth potential or lower risk compared to Company A.

Answer explanation

Company B is considered to have higher growth potential or higher risk compared to Company A.

5.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

Calculate the intrinsic value of a stock with an expected earnings per share of $4 and a required rate of return of 10%.

The intrinsic value of the stock is $20

The intrinsic value of the stock is $30

The intrinsic value of the stock is $50

The intrinsic value of the stock is $40

Answer explanation

The intrinsic value of the stock is $40. It is calculated using the formula: Intrinsic Value = Earnings per Share / Required Rate of Return. In this case, $4 / 0.10 = $40.

6.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

If Aisha is considering buying a stock with a current price of $60 and an intrinsic value of $75, what can she infer about the stock?

The stock is undervalued.

The stock is fairly valued.

The stock is overvalued.

The stock is worthless.

Answer explanation

Aisha can infer that the stock is undervalued because its intrinsic value is higher than its current price.

7.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

A company's stock is currently trading at $30. If the intrinsic value is $40, what can you infer about the stock?

The stock is undervalued.

The stock is overvalued.

The stock is fairly valued.

The intrinsic value is irrelevant.

Answer explanation

The stock is undervalued because its current trading price is lower than its intrinsic value.

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