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Preferred stock outstanding that pays stockholders

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Reference no: EM132218287

a. Tech Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal to $10 each year. If the appropriate required rate of return for this stock is 8%, what is its market value?

b. Tech Temps' financial statements show the following information: Average cost of funds 10.0 %

EBIT $ 500,000

Total capital $1,250,000

EPS $2.00

Shares outstanding 150,000

Marginal tax rate 30.0%

(1) Compute the company's economic value added (EVA)

(2) Interpret the value you computed in part l

c. Suppose that normally Tech Temps' P/E ratio is 20x. Using the information given previously, estimate the market price per share for Tech Temps' common stock.

Reference no: EM132218287

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