QUESTIONS 79 THROUGH 90 RELATE TO EQUITY INVESTMENTS

85. An equity fund manager gathers the following data in order to assess the

investment potential of a company and its stock:

Company Industry

Average

Weighted average cost of capital (WACC) 14% 12%

Return on Assets (ROA) 20% 15%

Dividend Yield 0 % 1.2%

Consensus estimate of stock’s value $53 N/A

Current price of company’s stock $50 N/A

Based on the above information, which of the following statements most accurately

describes the company and its stock? The company is a:

A. growth company and its stock is a growth stock.

B. growth company and its stock is a speculative stock.

C. speculative company and its stock is a growth stock.