Question

(Preferred stock value) McDonald’s Corp. preferred stock pays an annual dividend of $5 per share. Calculate...

(Preferred stock value) McDonald’s Corp. preferred stock pays an annual dividend of $5 per share. Calculate the value of one share to an investor who requires a rate of return of: (USING EXCEL)

a. 6%

b. 9%

c. 12%

d. 15%

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Answer #1

Annual dividend = $ 5 per share

Value of one share = annual dividend / rate

The calculations are shown in the excel table below:

A B C D
1 Rate Dividend Dividend/rate
2 a 0.06 5 83.33
3 b 0.09 5 55.56
4 c 0.12 5 41.67
5 d 0.15 5 33.33

a) When rate is 6% , we have calculated cell C2/cell B2 = 5/0.06 = 83.33 $ (answer)

b) When rate is 9% , we have calculated cell C3/cell B3 = 5/0.09 = 55.56 $ (answer)

c) When rate is 12% , we have calculated cell C4/cell B4 = 5/0.12 = 41.67 $ (answer)

d) When rate is 15% , we have calculated cell C5/cell B5 = 5/0.15 = 33.33 $ (answer)

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