1. What is meant by “intrinsic value”? How is it determined? (20 points) 2. The Hall Dental Supply Company sells at $32 per share, and Randy Hall, the CEO of this well-known Research Triangle firm, estimates the latest 12-month earnings are $4 per share with a dividend payout of 50%. Hall’s earnings estimates are very accurate. a. What is Hall’s current P/E ratio? (10 points) b. If an investor expects earnings to grow by 10% a year, what is the projected price for next year if the P/E ratio remains unchanged? (20 points) c. Ray Parker, President of Hall Dental Supply Company, analyzes the data and estimates that the payout ratio will remain the same. Assume the expected growth rate of dividends is 10% and an investor has a required rate of 16%; would this stock be a good guy? Why or why not? (20 pounds) d. If interest rates are expected to decline, what is the likely effect on Hall’s P/E’s ratio? (10 points) 3. What impact does the market have on well-diversified portfolios? What does this suggest about the performance of mutual funds? (10 points) 4. What is the relationship between fundamental analysis and intrinsic value? (10 points)

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