Question

Analysts that follow JPMorgan Chase, one of the nation's largest providers of financial services, estimate that the corporation's earnings per share will increase from $6.69 in the current year to $7.64 next year points a. What is the amount of the increase? (Round your answer to 2 decimal places.) Amount of increase ___.b. What effect, if any, should this increase have on the value of the corporation's stock? a. The stock's market value should increase. b. The stock's market value should decrease c. The stock's market value should remain the same.

Answer 1

a. The value of increase = $7.64 - $6.69

= $0.95

b. The increase in earnings per share will increase the stock's market value

The correct answer is A

Step-by-step explanation:

In the first scenario, the earnings per share rose from $6.69 to $7.64, which implies that the earning increases by $0.95.

An increase in earnings per share will increase the dividend per share at the same payout ratio. This increases the stock's market value.