A. Gordon Growth Model. Consider a common stock with a dividend of $10 per year, paid once per year, at the end of the year. The expected dividend growth rate is 3% per year. The required return on equity for any stock in this company is 8%. A dividend of $10 per common stock was paid on December 31 last year. On January 1^st, the day following the December 31 dividend payment, what is one share of the common stock worth? Show your work, including the Gordon Growth formula.

A. All factors in part A are the same, except that this is one share of preferred stock, not of common stock. What is the value of one share of preferred stock? Show your work, including definitions.

B. Some companies have high profits, but their common stock does not pay a dividend. Give one reason why, with all of these profits, that there is no dividend paid.