Explain finding the required rate of return

Reference no: EM1317027

Explain Finding the required rate of return and valuation of Preferred Stock

Preferred stock valuation:

1. Fee Founders has perpetual preferred stock outstanding that sells for $38.00 a share and pays a dividend of $3.00 at the end of each year. What is the required rate of return? Round the answer to the nearest hundredth. _____%

2. Preferred stock valuation Ezzell Corporation issued perpetual preferred stock with a 11% annual dividend. The stock currently yields 9%, and its par value is $100.

a. What is the stock's value? Round the answer to the nearest hundredth.

b. Suppose interest rates rise and pull the preferred stock's yield up to 11%. What would be its new market value? Round the answer to the nearest hundredth.

Reference no: EM1317027

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