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1. XU2 Company had preferred stock outstanding that pays a $7 investors' required rate of return is 12%: a. What is the market value of the shares? b. If the required rate of return declines to 10%, what is the change in the price of the annual dividend. If stock? Stock Price Change in stock price 2. What would the prices of the following preferred stock if comparable securities yield 6%? Why are the valuations different? a. $5 preferred ($100 par) b. $$ preferred ($100 par) with a mandatory retirement after 20 years . You are considering purchasing the preferred stock of a firm but are concerned about its capacity to pay the dividend. Compute the times-preferred-dividend-earned ratio for the years 2011, 2012 and 2013 from the following information in thousands of dollars. 2013 Year Operating income Interest Taxes Net income Preferred dividends Common dividends 2011 2012 10,000 3,000 4,000 3,000 1,000 3,000 12,000 5,000 5,000 2,000 1,100 2,000 15,000 10,000 4,000 1,000 1,200 2,000 2011 ratio 2012 ratio 2013 ratio