1. Apple has preferred stock outstanding that pays a dividend of $5 at the end of each year. The preferred sells for $30 a share. What is the stock's required rate of return (assume the market is in equilibrium with the required return equal to the expected return)? Round the answer to two decimal places.
2. A company currently pays a dividend of $1 per share (D₀ = $1). It is estimated that the company's dividend will grow at a rate of 16% per year for the next 2 years, and then at a constant rate of 6% thereafter. The company's stock has a beta of 1.45, the risk-free rate is 7.5%, and the market risk premium is 6%. What is your estimate of the stock's current price? Do not round intermediate calculations. Round your answer to the nearest cent.
3. Rustic Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at a constant rate of 8% per year. If D₀ = $4 and r_s = 9%, what is the estimated value of Brushy Mountain's stock? Round your answer to the nearest cent.
4. Assume that the average firm in your company's industry is expected to grow at a constant rate of 5% and that its dividend yield is 6%. Your company is about as risky as the average firm in the industry and just paid a dividend (D₀) of $1.5. You expect that the growth rate of dividends will be 50% during the first year (g_0,1 = 50%) and 20% during the second year (g_1,2 = 20%). After Year 2, dividend growth will be constant at 5%. What is the estimated value per share of your firms stock? Do not round intermediate calculations. Round your answer to the nearest cent.