Outstanding issue of perpetual preferred stock

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Reference no: EM131947062

1. A share of common stock just paid a dividend of $1.20. If the expected long-run growth rate for this stock is 6%, and if investors' required rate of return is 12%, what is the stock price now, P0? Show work.

a. $20.28 b. $21.20 c. $24.93 d. $28.57

2. Melon Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $8.50 per share. If the required return on this preferred stock is 7.25%, at what price should the stock sell? Show work.

a. $104.27 b. $106.95 c. $126.66 d. $117.24

Reference no: EM131947062

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