a. Suppose that the average P/E multiple in the gas industry is 17. KMP is expected to have an EPS of $5.50 in the coming year. The intrinsic value of KMP stock should be ____.

b. J.C. Penney Company is expected to pay a dividend in year 1 of $1.65, a dividend in year 2 of $1.97, and a dividend in year 3 of $2.54. After year 3, dividends are expected to grow at the rate of 8% per year. An appropriate required return for the stock is 11%. The stock should be worth _______ today.

c. The goal of fundamental analysts is to find securities

A) whose intrinsic value exceeds market price. B) with a positive present value of growth opportunities. C) with high market capitalization rates. D) All of these are correct. E) None of these is correct.

d. The stock price of Ajax Inc. is currently $105. The stock price a year from now will be either $130 or $90 with equal probabilities. The interest rate at which investors can borrow is 10%. Using the binomial OPM, the value of a call option with an exercise price of $110 and an expiration date 1 year from now should be worth __________ today.