(a) What classification of common stock would you recommend to Ji? Why? (b) Calculate the P/E ratio...

Question:

(a) What classification of would you recommend to Ji? Why?
(b) Calculate the P/E ratio and the payout ratio for this stock. Given this information and your recommendation, would this stock be an appropriate purchase for Ji? Why or why not?
(c) Identify the components of the total return Ji might expect, and estimate how much he might expect annually from each component.

Ji Wu of Jefferson City, Tennessee, has $5000 that he wants to invest in the stock market. Ji is in college on a scholarship and does not plan to use the $5000 or any income for another five years, when he plans to buy a home. He is currently considering a small company stock selling for $25 per share with an EPS of $1.25. Last year, the company earned $900,000, of which $250,000 was paid out in dividends. Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... 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...