Question

**PREFERRED STOCK VALUATION**

Farley Inc. has perpetual preferred stock outstanding that sells for $46.00 a share and pays a dividend of $4.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places.

%

Answer #1

Required return is the division of dividend per share by the selling price of each share with a multiplication of 100.

Required return = (Dividend / Selling price) × 100

= ($4 / $46) × 100

= 8.6956 ….. %

= 8.70 % rounded

Answer: 8.70 %

PREFERRED STOCK VALUATION
Farley Inc. has perpetual preferred stock outstanding that sells
for $30.00 a share and pays a dividend of $3.00 at the end of each
year. What is the required rate of return? Round your answer to two
decimal places.
%

Farley Inc. has perpetual preferred stock outstanding that sells
for $34 a share and pays a dividend of $2.75 at the end of each
year. What is the required rate of return? Round your answer to two
decimal places.
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Farley Inc. has perpetual preferred stock outstanding that sells
for $38 a share and pays a dividend of $3.00 at the end of each
year. What is the required rate of return? Round your answer to two
decimal places.

CORPORATE VALUATION
Scampini Technologies is expected to generate $150 million in
free cash flow next year, and FCF is expected to grow at a constant
rate of 7% per year indefinitely. Scampini has no debt or preferred
stock, and its WACC is 13%. If Scampini has 65 million shares of
stock outstanding, what is the stock's value per share? Round your
answer to two decimal places.
Each share of common stock is worth $ ____, according to the
corporate valuation...

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.

Smiling Elephant, Inc., has an issue of preferred stock
outstanding that pays a $5.00 dividend every year, in
perpetuity.
If this issue currently sells for $80.10 per share, what is the
required return? (Do not round intermediate calculations
and enter your answer as a percent rounded to 2 decimal places,
e.g., 32.16.)
Required return
%

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.

CONSTANT GROWTH VALUATION
Holtzman Clothiers's stock currently sells for $21 a share. It
just paid a dividend of $3.75 a share (i.e., D0= $3.75). The
dividend is expected to grow at a constant rate of 5% 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.
%

CONSTANT GROWTH VALUATION
Holtzman Clothiers's stock currently sells for $35 a share. It
just paid a dividend of $2.25 a share (i.e., D0 =
$2.25). The dividend is expected to grow at a constant rate of 9% 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.
%

CONSTANT GROWTH VALUATION
Holtzman Clothiers's stock currently sells for $26 a share. It
just paid a dividend of $1.25 a share (i.e., D0 =
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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.
%

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