4. Similar to characteristics of a bond, preferred stocks pays a fixed dividend of its face value and therefore has no dividend growth rate. On the other hand, similar to stocks preferred stocks have perpetual life. A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 16%. What is the value of the preferred stock? 5. A firm has an expected dividend next year of $3.60 and a required rate of return of 12%. Calculate the value of a share of common stock assuming a zero growth rate of dividends. 6. Emmy Lou, Inc. has an expected dividend next year of $5.60 per share, a growth rate of dividends of 10%, and a required return of 20%. What is the value of a share of Emmy Lou's common stock? 7. A firm has experienced a constant annual rate of dividend growth of 9% on its common stock and expects the dividend per share in the coming year to be $2.70. The firm can earn 12% on similar investments. What is the value of the firm's common stock? 1. Stevenson Company would like to raise funds to purchase much needed replacement machines that are wearing down and outdated. The financial manager suggests to the Board of Directors that the best strategy is to issue bonds. a. If Stevenson Company issues the bonds, what is the value of a Stevenson bond that matures in 3 years and pays semi-annually interest. The offered coupon rate is 10% and the principal is $1000. The market rate of return is currently 12%? b. Stevenson Company also had previously issued bonds which will mature in 7 years and have a coupon rate of 9% semiannually, currently selling for $904.47. What is this bond's YTM? 2. MI has a $1,000 par value, 30-year bond outstanding that was issued 20 years ago at an annual coupon rate of 10%, paid semiannually. Market interest rates on similar bonds are 7%. Calculate the bond's price. 3. Davis & Davis issued $1,000 par value bonds at $1020. The bonds pay 12% interest annually and mature in 30 years. What is the market rate of interest yield?