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need help with questions 6-8

6. A stock index consists of two stocks: Company A has 50 shares outstanding valued at $2 each Company B has 10 shares outstanding valued at $10 each The price weighted index is 6, and the value-weighted index is 100 If the price of Company A's stock increases to $4 per share, and Company B's stock splits two for one and is priced at $5, the value of the price-weighted index and the value-weighted index are: Price Weighted Value Weighted a 7 150 b. 7 125 6. 4.5 150 7. Pam Robers, CFA, is performing a valuation analysis on the common stock of Allstare Inc. The stock's beta is 1.1, the risk-free rate is 5%, and the market risk premium is expected to be 8%. Allstare's ROE is expected to be constant at 18%, and its dividend payout ratio has been fairly constant over time at 40%. The forward-earnings multiplier that Robers should use to estimate the current value of the shares is closest to: a. 7 b. 13 c. 20 8. Other things equal, which of the following would be least likely to increase a firm's return on shareholders' equity? a Payment of a large special dividend by the firm b. Repurchase of common stock with the proceeds of a debt offering c. Decrease in the market price of a firm's shares due to a sharp decrease in stock prices overall

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