Q6

7. What is a good estimate of the value of a perpetual preferred stock if the annual dividend is $2.8 per share and the required return for such assets are 5.2%? Answer to the nearest cent as in xx.xx and enter without the dollar sign.

8. If your stock paying annual dividends will pay a dividend D₁ at t=1 of $1.58 and have a growth rate of 11% between t=1 and t=2, and with a constant growth rate of 5% thereafter into the future, what should be the value of the stock at t=0 if the expected rate of return for the stock is 8%? Notice that in this problem, expected dividends are given at t = 1, not t = 0! Answer to the nearest cent as in xx.xx and enter without the dollar sign.