Companies that have preferred stock outstanding promise to pay a stated dividend for an infinite period, Preferred stock is treated like a perpetuify if the payments last forever. Preferred stocks are considered to be a hybrid of a common stock and a bond. For example, one of the major differences. between preferred shares and bonds is that the issuing companies can suspend the payment of their preferred dividends without throwing the company into bankruptcy. However, similar to bonds, preferred stocholders receive a fixed payment-their dividend-before the company's residual earnings are paid out to its common stockholders and, as with common- stock, preferred stockholders can benefit from an appreciation in the value of the firm's stock securities. Consider the following case of Edinburgh Exports: Edinburgh Exporte pays an annual dividend rate of 8.00% on its preferred stock that currently returns 10.72% and has a par value of $100.00 per share. What is the value of Edinburgh's preferred stockc $111.94 per share $89.56 per share 374,63 Der share $100,00 per share Suppose that there is high unemplovment, which causes interest rates to fall, which in turn pulls the preferred stock's yield to 6.4396. The value of the preferred stock will As companies evolve, certain factors can drive sudden growth. This may lead to a period of nonconstant, or variable, growth. This would cause the expected growth rate to increase or decrease, thereby affecting the valuation model. For companies in such situations, you would refer to the variable, or nonconstant, growth model for the valuation of the company's stock. Consider the case of Portman Industries: Portman Industries just paid a dividend of $1.44 per share. The company expects the coming year to be very profitable, and its dividend is expected to grow by 16.00% over the next year. After the next year, though, Portman's dividend is expected to grow at a constant rate of 3.20% per year. Assuming that the market is in equilibrium, use the information just given to complete the table. The risk-free rate (rRF) is 4.00%, the market risk premium (RPMRPM) is 4.80%, and Portman's beta is 1.30. What is the expected dividend yield for Portman's stock today? 7.54% 6.84% 5.65% 7.06%