Question
1. A preferred stock will pay a $2.50 dividend this year and selling for $30. It has a $25 Face value. You require an 8%
1. A preferred stock will pay a $2.50 dividend this year and selling for $30. It has a $25 Face value. You require an 8% return for this type of investment. The growth rate for the firms common stock is 12%. The maximum you would pay would be: a. $31.25
b. 8.33%
c. $25.00
d. $30.00
e. $62.50
2. The company expects to pay a dividend of $3.50 for its common stock this year and they have a constant growth rate of 9%. You require a 13% return on this stock. Based on this information, your expected return if you purchased the stock would be? The stock is selling for $90.
a. $87.50
b. $90.00
c. 13.00%
d. 12.89%
3. You are looking at investing in the common stock and you project that the stock will pay dividends of a $2.00 one year from now, $2.50 two years from now, $4.00 three years from now and you believe you can sell it for $70 at that time. Based on a required rate of return of 15%, the maximum you are willing to pay for the stock would be:
a. $70.00
b. $52.29
c. $97.06
d. $50.99
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