1. A company has just paid an annual dividend of $4.00 per share. The company will increase its dividend by 30 percent next year.The firm will then reduce its dividend growth rate by 6 percent each year until the dividend reaches the industry average of 6 percent growth.The firm will then maintain that dividend growth rate forever.The annual required rate of return for the company is 13 percent.Find the price of the stock.
2. The preferred stock of XYZ Corp. pays a fixed annual dividend of $6. The annual required rate of return on the preferred stock is 12 percent.Compute the price of the preferred stock.
3. A company has preferred stock outstanding that pays a fixed annual dividend of $7. It has a price of $70.What is the annual required rate of return on the preferred stock?