Question
4. Designs, Inc., has an issue of preferred stock outstanding that pays a $4.35 dividend every year in perpetuity. If this issue currently sells for
4. Designs, Inc., has an issue of preferred stock outstanding that pays a $4.35 dividend every year in perpetuity. If this issue currently sells for $95 per share, what is the required return?
5. Sweet Treats, Inc., is planning to pay no dividends on the stock over the next nine years because the firm needs to plow back its earnings to fuel growth. The company will pay a dividend of $10 per share 10 years from today and will increase the dividend by 6 percent per year thereafter. If the required return on this stock is 11 percent, what is the current share price?
6. Dividends of Red Cow, Inc. are expected to grow at a rate of 25 percent for the next three years, with the growth rate falling off to a constant 6 percent thereafter. If the required return is 11 percent, and the company just paid a dividend of $1.15, what is the current share price?
7. Zeph, Inc. has preferred stock. The stock will pay an annual dividend of $19 in perpetuity, beginning 8 years from now. If the market requires a return of 3.3 percent on this investment, how much does a share of preferred stock cost today?
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