Question
The Rapidly Growing Company has 100,000 9.0% dividend preferred shares issued and outstanding. The preferred shares...
The Rapidly Growing Company has 100,000 9.0% dividend preferred shares issued and outstanding. The preferred shares are participating, have a par value of $100, and mature in 5 years. The company expects to grow at 3 percent forever. If investors require a 12 percent return, what will the preferred shares sell for in the market today?
Homework Answers
Answer #1
9% dividend Preferred shares issued for = $ 100 per share
No of Preferred shares = 100,000
Total Value of Preferred shares = 100,000 shares*$100 per share
= $10,000,000
Annual dividend on Preferred shares = $10,000,000*9%
= $ 900,000
As Preferred Stocks are paid Fixed dividends, growth rate of earnings are irrelevant for it
Maturity (n) = 5
Required return = r = 12%
Calculating the Price of Preffered STock today:
Price = $ 3244,298.58 + 5674,268.56
Price = $ 8,918,567.14
No oF shares = 100,000
Price per share = $ 8,918,567.14/100,000
= $ 89.19 per share
Not the answer you're looking for?
Similar Questions
A company has 10,000 shares of 7% preferred stock issued and outstanding. The preferred stock has...
A company has 10,000 shares of 7% preferred stock issued and
outstanding. The preferred stock has a par value of $100 per share.
This means that:
A. If the Board of Directors declares a dividend, the potential
dividend will be $7 for each preferred share.
B. The firm is obligated to buy-back the preferred shares at a
7% markup above the par value.
1. Buckstars Inc. is a rapidly growing exotic herb company. The firm expects to pay its...
1. Buckstars Inc. is a rapidly growing exotic herb company. The
firm expects to pay its first dividend of $2.90 per share 3 years
from today and management then expects to grow the dividend at 28%
for 2 years. As competition enters the market, dividend growth
after that will drop to 3% forever. If the appropriate discount
rate is 10%, what is the share price today? Solve in excel and
round your final answer to 2 decimal places.
Preferred stock— $25 par value, 10,000 shares authorized, 5,200 shares issued and outstanding $ 130,000 Common...
Preferred stock— $25 par value, 10,000 shares authorized, 5,200
shares issued and outstanding
$
130,000
Common stock—$10 par value, 100,000 shares authorized, 80,000
shares issued and outstanding
800,000
Total paid-in capital
$
930,000
Retained earnings
550,000
Total stockholders’ equity
$
1,480,000
The number of issued and outstanding shares of both preferred and
common stock have been the same for the last two years. Dividends
on preferred stock are 8 percent of par value and have been paid
each year the...
Brazee Company has the following paid-in capital: Preferred stock, 6%, $5 par value, 100,000 shares authorized,...
Brazee Company has the following paid-in capital:
Preferred stock, 6%, $5 par value, 100,000 shares authorized,
40,000 shares issued and outstanding
$2,000,000
Common stock, $9 par value, 300,000 shares authorized, 220,000
shares issued and outstanding
$1,980,000
If the company pays a $70,000 dividend, and the preferred stock
is cumulative and two years' dividends are in arrears, what is the
amount the common stockholders will receive?
Multiple Choice:
A) $34,000
B) $46,000
C) $58,000
D) $70,000
Katie Corporation, based in Liverpool, has 20,000 preferred shares outstanding of no par value $2 dividend...
Katie Corporation, based in Liverpool, has 20,000 preferred
shares outstanding of no par value $2 dividend and 40,000 common
shares outstanding of no par value.
In its first years of operation, the company paid the following
dividends:
2010 .............$0
2011 .............$46,000
2012 ............. $78,000
2013 ............. $0
2014 ............. $82,000
Calculate the dividends paid to preferred and common shareholders
in each of the five years under the following three independent
situations:
a. Preferred shares are noncumulative and nonparticipating.
b. Preferred...
An all-equity company has common and preferred shares. There are 250,000 common shares outstanding with a...
An all-equity company has common and preferred shares. There are
250,000 common shares outstanding with a price of $51.10 per share
and with an expectation to continue to provide a dividend of $5.30
per share. There are 50,000 preferred shares outstanding, with a
5.74% dividend, $100 par value per share, and $80.50 market value
per share. Given this information, what is the company's WACC?
Question options: 9.12% 9.36% 9.60% 9.84% 10.08%
TX paid $7m ordinary dividend for its 4m outstanding shares. The company decides to pay no...
TX paid $7m ordinary dividend for its 4m outstanding shares. The
company decides to pay no dividend next year but 4 per cent more
dividend in the second next year. The same growth in dividend is
expected to continue forever. If the market expects 13 per cent
return from this company, what would be the value for DTX share
today?
Zena Corp just paid investors a dividend of $1.25. This growing company expects dividends to grow...
Zena Corp just paid investors a dividend of $1.25. This growing
company expects dividends to grow at 8% for the next three years.
After year 3, dividends are expected to grow constantly at 2% per
year. Investors require a 7% return on Zena Corp stock. What is the
current value of Zena Corp stock?
1-$30.04 2-$28.51 3-$25.00 4-$26.22
Filmore Incorporated anticipates its revenues and common stock
dividends will remain flat forever. It currently pays an annual
dividend of $20...
A corporation has the following: 6% Preferred Stock, $50 par, 500,000 shares authorized, 100,000 issued and...
A corporation has the following:
6% Preferred Stock, $50 par, 500,000 shares
authorized,
100,000 issued and outstanding
Common Stock, $2 par, 8,000,000 shares
authorized,
5,000,000 issued and outstanding
The company paid $750,000 of dividends in
2019. Calculate the amounts paid
to the preferred and common shareholders.
Determine the amount paid to each class of stock
listed above if the preferred stock is cumulative and
no dividends were paid in 2017 or 2018
What is the dollar impact an any potential 2020...
A company has the following Stock Information: Preferred stock, 6.5%, $50 par value, 100,000 shares authorized,...
A
company has the following Stock Information:
Preferred stock, 6.5%, $50 par value, 100,000 shares
authorized,
20,000 shares issued and outstanding
1,000,000
Common Stock, $9 par value, 300,000 shares authorized,
175,000 shares issued and outstanding
1,980,000
The board of directors declared a cash dividend in the amount
of $80,000. (round to the nearest 2 decimal places)
a How much will the Preferred Stockholders receive in
total?
b How much will the Common Stockholders receive in
total?
c...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 5 minutes ago
asked 6 minutes ago
asked 10 minutes ago
asked 10 minutes ago
asked 11 minutes ago
asked 30 minutes ago
asked 31 minutes ago
asked 48 minutes ago
asked 52 minutes ago
asked 55 minutes ago
asked 57 minutes ago
asked 1 hour ago