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Calculate the value of fridge-air preferred stock

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Reference no: EM132966083

Problem 1: The Fridge-Air Company's preferred stock pays a dividend of $4.50 per share annually. If the required rate of return on comparable quality preferred stocks is 14 percent, calculate the value of Fridge-Air's preferred stock.

Option 1: $16.07
Option 2: $32.14
Option 3: None of these
Option 4: $64.28

Problem 2: The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year just ended. Earnings and dividends per share are expected to grow at a rate of 5 percent per year in the future. Determine the value of the stock if the required rate of return is 12 percent.

Option 1: $18.57
Option 2: $13.65
Option 3: $19.50
Option 4: $11.33

Reference no: EM132966083

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