Question

Earley Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields 9%,...

Earley Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields 9%, and its par value is $100.

What is the stock's value? Round your answer to two decimal places.
$

Suppose interest rates rise and pull the preferred stock's yield up to 15%. What is its new market value? Round your answer to two decimal places.
$

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Earley Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields 9%, and its par value is $100.

annual dividend= 12% of $100 = $12

current yield = 9% = 0.09

Stock value = annual dividend/ current yield

= $12/0.09

= $133.33

Suppose interest rates rise and pull the preferred stock's yield up to 15%

new market value of stock = $12/0.15 = $80.

Hence, the market value falls to $80 with the rise in stocks yield from 9% to 15%

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
PREFERRED STOCK VALUATION Earley Corporation issued perpetual preferred stock with a 11% annual dividend. The stock...
PREFERRED STOCK VALUATION Earley Corporation issued perpetual preferred stock with a 11% annual dividend. The stock currently yields 10%, and its par value is $100. What is the stock's value? Round your answer to two decimal places. $ Suppose interest rates rise and pull the preferred stock's yield up to 11%. What is its new market value? Round your answer to two decimal places. $
Earley Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%,...
Earley Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%, and its par value is $100. Round your answers to the nearest cent. What is the stock's value? $    Suppose interest rates rise and pull the preferred stock's yield up to 12%. What is its new market value? $  
Holtzman Clothiers's stock currently sells for $29 a share. It just paid a dividend of $1.5...
Holtzman Clothiers's stock currently sells for $29 a share. It just paid a dividend of $1.5 a share (i.e., D0 = $1.5). The dividend is expected to grow at a constant rate of 6% a year. What stock price is expected 1 year from now? Round your answer to two decimal places. $ What is the required rate of return? Round your answer to two decimal places. Do not round your intermediate calculations. % Earley Corporation issued perpetual preferred stock...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 8% of...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 8% of its $100 par value. Preferred stock of this type currently yields 8%. Assume dividends are paid annually. What is the estimated value of Rolen's preferred stock? Round your answer to the nearest cent. $ Suppose interest rate levels have risen to the point where the preferred stock now yields 11%. What would be the new estimated value of Rolen's preferred stock? Round your answer...
Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays...
Bruner Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3, and its current price is $104. What is its nominal annual rate of return? Round your answer to two decimal places. % What is its effective annual rate of return? Round your answer to two decimal places.
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays...
Arondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock pays a quarterly dividend of $3.00, and its current price is $88. What is its nominal annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places. What is its effective annual rate of return? Do not round intermediate calculations. Round your answer to two decimal places.
Preferred Products has issued preferred stock with an annual dividend of $5.60 that will be paid...
Preferred Products has issued preferred stock with an annual dividend of $5.60 that will be paid in perpetuity.a. If the discount rate is 10.00%, at what price should the preferred sell? (Round your answer to 2 decimal places.) b. At what price should the stock sell 1 year from now? (Round your answer to 2 decimal places.) c. What is the dividend yield, the capital gains yield, and the expected rate of return of the stock? (Enter your answers as...
The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The...
The First Bank of Flagstaff has issued perpetual preferred stock with a $100 par value. The bank pays a quarterly dividend of $1.60 on this stock. What is the current price of this preferred stock given a required rate of return of 12.8 percent? (Round answer to 2 decimal places, e.g. 15.25.) Current price $enter the current price of the preferred stock rounded to 2 decimal places
(a) Company A has issued perpetual preferred stock with a par value of $100. The stock...
(a) Company A has issued perpetual preferred stock with a par value of $100. The stock pays an annual dividend of $6 and its current price is $60. (i) What is the dividend yield of Company A’s preferred stock? (ii) What is the total return of holding Company A’s preferred stock for year 1?   (b) Company B has just paid a dividend of $2.45 per share. The company will increase its dividend by 20% next year and then reduce its...
Barnes Air Conditioning Inc. has two classes of preferred stock: floating rate preferred stock and straight...
Barnes Air Conditioning Inc. has two classes of preferred stock: floating rate preferred stock and straight (normal) preferred stock. Both issues have a par value of $100. The floating-rate preferred stock pays an annual dividend yield of 6 percent, and the straight preferred stock pays 7 percent. Since the issuance of the two securities, interest rates have gone up by 1.00 percent for each issue. Both securities will pay their year-end dividend today. a. What is the price of the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT