Question
Baron Corp is considering issuing additional preferred and common shares in order to raise capital for the construction of a new warehouse. Their preferred shares
Baron Corp is considering issuing additional preferred and common shares in order to raise capital for the construction of a new warehouse. Their preferred shares currently pay an annual dividend of $12 per share, with investors requiring a return of 15%. Their common stock paid a dividend of $7.5.00 per share last year and it is expected that earnings and dividends will grow by 15% for the next three years before dropping to a constant rate of 10% thereafter. The required rate of return for common shareholders is 14%
Required: Determine the current price of the companys preferred and common shares. (10 marks)
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