Segwick Manufacturing has an outstanding preferred stock issue with a par value of $50 per share. The

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Segwick Manufacturing has an outstanding preferred stock issue with a par value of $50 per share. The preferred shares pay dividends annually at a rate of 5%.

a. What is the annual dividend on Segwick’s preferred stock?

b. If investors require a return of 6% on this stock and the next dividend is payable 1 year from now, what is the price of Segwick’s preferred stock?

c. Suppose that Segwick has not paid dividends on its preferred shares in the past 2 years, but investors believe it will start paying dividends again in 1 year. What is the value of Segwick’s preferred stock if it is cumulative and if investors require a 6% rate of return?

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Principles Of Managerial Finance Brief

ISBN: 9781292267142

8th Global Edition

Authors: Chad J. Zutter, Scott B. Smart

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