Preferred stock valuation-common stock valuation

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Reference no: EM131819128

?1. (Preferred stock valuation?) You are considering an investment in Minnix? Petroleum's preferred stock. The preferred stock pays a dividend of $ 1.71. Your required return is 13 percent. Value the stock. The value of the preferred stock is $ per share. ?(Round to the nearest? cent.)

?2. (Common stock valuation?) Bates Inc. pays a dividend of $2.75 and is currently selling for $36.65. If investors require a return of 13 percent on their investment from buying Bates? stock, what growth rate would Bates Inc. have to provide the? investors? The growth rate Bates Inc. would have to provide the investors is ?%. (Round to two decimal? places.)

Using the constant growth dividend valuation model and assuming dividends will grow at a constant rate? forever, the increase in the value of the stock each year should be equal to the

A. dividend yield.

B. required return on the? stock, rcs.

C. dividend yield plus the capital gains yield.

D. growth rate in? dividends, g.

3. (Common stockholder expected return?) The market price for Earnest Corporation common stock is $43 per share. The price at the end of 1 year is expected to be $48?, and dividends for next year should be $1.50. What is the expected rate of? return? The expected rate of return is ?%. (Round to two decimal? places.) ANSWER:

?4. (Preferred stock valuation?) What is the value of a preferred stock when the dividend rate is 12 percent on a $ 125 par? value? The appropriate discount rate for a stock of this risk level is 9 percent.The value of the preferred stock is ?$?(Round to the nearest? cent.)

Reference no: EM131819128

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