Stock Valuation Mini-Case You have finally saved $10,000 and are ready to make your first esment. You have the three following al Your required rates of return for these investments are ternatives for invest 6 percent for the bond, 7 percent for the preferred stock, and 15 percent for the common stock. Using this information, an- ing that money: Capital Cities ABC, Inc. bonds with a par value of $1,000 swer the following questions. and a coupon interest rate of 8.75 percent, are selling for a. Calculate the value of each investment based on your re- S1,314 and mature in 12 years. quired rate of return. Southwest Bancorp preferred stock is paying a dividend of b. Which investment would you select? Why? S2.50 and selling for $25.50. c. Assume Emerson Electric's managers expect an earnings Emerson Electric common stock is selling for $36.75. The downturn and a resulting decrease in growth of 3 percent. How does this affect your answers to parts a and b? stock recently paid a $1.32 dividend and the firm's earnings per share has increased from $1.49 to $3.06 in the past five years. The firm expects to grow at the same rate for the d. What required rates of return would make you indifferent to all three options? foreseeable future