8-3. (Preferred stock valuation) What is the value of Queens Park PLCs preferred stock when the dividend rate is 10 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 16 percent.

8-10. (Common stock valuation) The dividend policy of Scorpio, Inc. has recently been revised to payout 40 percent of its earnings to shareholders. The company has just paid dividends of $3 per share.

a. Calculate the growth rate if the return on equity is 12 percent.

b. Calculate the cost of capital if the market price of Scorpios stock is $50.

c. If you require a 18 percent return, should you invest in the firm? Why?