Question
1. Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3.00, and its current
1. Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3.00, and its current price is $87.
a. What is its nominal annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
b. What is its effective annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. %
2. Maxwell Mining Company's ore reserves are being depleted, so its sales are falling. Also, because its pit is getting deeper each year, its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate of 8% per year. If D0 = $5 and rs = 16%, what is the value of Maxwell Mining's stock? Round your answer to the nearest cent.
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