In April 2005, General Motors traded at $28 per share on book value of $49 per share.

Question:

In April 2005, General Motors traded at $28 per share on book value of $49 per share. Analysts were estimating that GM would earn 69 cents per share for the year ending December 2005. The firm was paying an annual at the time of $2.00 per share.
a. Calculate the price-to-book ratio (P/B) and the return on common equity (ROCE) that analysts were forecasting for 2005.
b. Is the P/B ratio justified by the forecasted ROCE?
c. An analyst trumpeted the high yield as a reason to buy the stock. yield is dividend/price.) "A yield of over 7 percent is too juicy to pass up," he claimed. Would you rather focus on the ROCE or on the yield?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...