P7-6 Common stock value-Zero growth Kelsey Drums, Inc., is a well-established supplier of fine percussion instruments to orchestras all over the United States. The company's class A common stock has paid a dividend of $2.80 per share per year for the last 12 years. Management expects to continue to pay at that amount for the foreseeable future. Kim Arnold purchased 200 shares of Kelsey class A common 10 years ago at a time when the required rate of return for the stock was 7.6%. She wants to sell her shares today. The current required rate of return for the stock is 9.25%. How much total capital gain or loss will Kim have on her shares? P7-7 Preferred stock valuation Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of $80 and pays an annual dividend of $6.40 per share. Similar-risk preferred stocks are currently earning an annual rate of return of 9.3%. a. b. What is the market value of the outstanding preferred stock? If an investor purchases the preferred stock at the value calculated in part a, how much does she gain or lose per share if she sells the stock when the required return on similar-risk preferred stocks has risen to 10.5%? Explain. P7-11 Common stock value: Constant growth The common stock of Barr Labs Inc., trades for $114 per share. Investors expect the company to pay a $1.35 dividend next year, and they expect that dividend to grow at a constant rate forever. If investors require a15.8% return on this stock, what dividend growth rate do they anticipate?