Understanding the Approximate Expected Return Equation The formula for the approximate expected return of an investment can look intimidating, but it's really just a function of three things: (1) average annual current income, (2) average capital gains, and (3) the average value of the investment, Based on the information in the table, compute each of these values for the two stocks over a 3-year period and enter the values into the bottom half of the table. Next, derive the correct formula for approximate expected return by correctly arranging these three variables in the equation that follows. Next, derive the correct formula for approximate expected return by correctly arranging these three variables in the equation that follows. Approximate Expected Return = Avg. Cl + Avg CG 1 Using this formula, you can see that the approximate expected return for Stock 1 is and the approximate expected return for stock : True or False: For these investments to be equally attrhative, stock 2 must carry lower risk than stock 1. True An informed and prudent investor uses a variety of measures such as financial ratios, book value, earnings per share, return on equity etc. to evaluate the worthiness and prospects of stocks he/she would invest in. It is important for you as an investor to understand how these values are calculated and what they mean. Use the following tables to assess the worthiness of Verticon stock as an investment Verticon Stock Data (Current and Historical) Chapter 12 -Assignment One of the most important features of a stock is its book value. The book value per share of Verticon's stock last year One of the most important features of a stock is its book value. The book value per share of Verticon's stock last vear was equal to Verticon's book value per share has been since three years ago, a fact that reflects on the company's overall growth. Based on the given price and You can determine that verticon's EPS is equal to What does it mean to invest in stocks? Common stock is considered to be one of the most popular investment vehicles for long-term wealth building. Investors earn income from common stock in the form of dividends and/or capital gains. As an investor it is important to understand the implications of investing in stocks from a tax perspective. Calculating taxes owed on Bob's investment Two years ago, Bob purchased 100 shares of a particular company's stock at a price of $66.85 per share. Last year, Bob recelved an annual dividend of $1.10 per share, and at the end of the year, a share of stock was trading at $69.88 per share. This year, Bob received an annual dividend of $1.21 per share and at the end of the year sold all 100 shares at a price of $90.09 per share. In the first column of the following table, enter the total annual dividends Bob received dich year, as well as the cotal capital gains at the end of each year, Suppose Bob is in the 32% tax bracket. Compute the caxes Bob pays each year on dividends and copital gains from this investment by completing the second column in the table. Note: Throughout this problem, please round your answers to the nearest cent. Suppose Bob is in the 32% tax bracket. Compute the taxes Bob pays each year on dividends and capital gains from this investment by completing the second column in the table. Note: Throughout this problem, please round your answers to the nearest cent. The total amount of investment income (pre-taxes) that Bob eamed on this investment over the course of 2 years is The total amount that Bob pays in taxes on income from this investment income is