Question 3 A) B) In the case of liquidation, common stockholders are paid before preferred stockholders, who in turn are paid before bondholders. Do you agree with the statement? Justify your answers. Firm Geneva has an outstanding issue of 10,000 units of preferred stock with a $100 par value and an 8% annual dividend. The preferred stock is cumulative, and the board of directors has not paid the preferred dividend for the prior two years. The firm also has 500,000 units of common stock outstanding. This year, the firm is profitable, reporting a net income of $1,880,000. To reward its common stockholders, the board of directors has announced to only retain 40% of its net income. What is the dividend per share payable to the common stockholders? C) D) At year end, Swan Berhad balance sheet showed total assets of RM60 million, total liabilities (including preferred stock) of RM45 million, and 1,000,000 shares of common stock outstanding. Next year, Swan is projecting that it will have net income of RM1.5 million. If the average price-per-earnings (P/E) multiple in Swan's industry is 15, what should be the price of Swan's stock? Daniel Custom Cycles' common stock currently pays no dividends. The company plans to begin paying dividends beginning 3 years from today. The first dividend will be RM3.00, and dividends will grow at 5 percent per year thereafter. (i) Given a required return of 15%, what would you pay for the stock? (ii) If the required return increases to 18%, what would you pay for the stock? (iii) Based on your answers in (i) and (ii), explain the relationship between required return and stock price.