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• Creative Toys recently paid a dividend of $1.35 a share.

It has a
payout ratio of 67%, a ROE of 23%, and an expected growth rate in
earnings and dividends for the foreseeable future of 7.6%.
Shareholders require a return of 14% on their investment. The
justified price to book value multiple is closest to:
• Consumer Products, Inc. has a trailing P/E of 27.52, while the median
peer group P/E is 33.25. Assuming that there are no differences in the
fundamentals among the peer firms and Consumer Products, the firm
is:
• A. correctly valued.
• B. overvalued.
• C. undervalued.
• Party Favors, Inc. has a leading P/E of 18.75 and a 5-year consensus
growth rate forecast of 15.32%. The median PEG, based on leading
P/E, for a group of companies comparable in risk to Party Favors, Inc.
is 0.92. The stock appears to be:
• A. overvalued because its PEG ratio is 0.82.
• B. overvalued because its PEG ratio is 1.22.
• C. undervalued because its PEG ratio is 0.82.