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Problem 1 (7 marks) Dartmouth Subsidiaries has two preferred shares issued and outstanding. Series A is a perpetual preferred share that has a par value
Problem 1 (7 marks)
Dartmouth Subsidiaries has two preferred shares issued and outstanding. Series A is a perpetual preferred share that has a par value of $35.00 that pays an annual dividend of $3.15. The companys series D preferred shares mature in 8 years and pay a 7 percent annual dividend and have a par value of $75.00.
- You observe that the companys series A preferred shares are selling for $33.00 in the market today. Calculate the market rate of return for the companys series A preferred shares. Show your work! (3 marks)
- The companys series D preferred shares have the same risk as the series A preferred shares and will; therefore, have the same required rate of return. Calculate the current market price of the series D preferred shares. Show your work! (4 marks)
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