1. A share of preferred stock has a par value of $30. It pays a 3%dividend. If the required return is 7 % ?, what is the price of the stock?
The preferred stock's price per share is______(round to the nearest cent)
2. If preferred stock sold for $81 a share and $2.35 dividends were paid? annually, what would be the required rate of return?
The required rate of return would be_____(round to two decimal places)
3. You are contemplating the purchase of a stock you will hold for 2 years. You will receive $0.81per year in dividends, and then you expect to sell it for $30. If the required return is 8%, what is the most you would pay for the stock?
The most you would pay for the stock is $______(round to the nearest cent)
4. Carlson Enterprises' common stock dividend is expected to grow at 2% per year. The dividend recently paid was $0.24 per share, and the required return is 9%.
a. What is the estimated value of the common stock?
b. If the value of a common stock was $92 per share and dividends were recently $2.73, but expected to grow at 4% per year, what would be the required rate of return?
5. Bryson? Industries's free cash flow to its equity holders (FCFE) was $30 million in its most recent fiscal year that just ended. Bryson's FCFE is expected to grow steadily at 4 % per year in perpetuity. The 10-year T-note yield is 2%, the expected market risk premium is 7% and Bryson's beta is 1.2. Bryson has 20 million shares outstanding. What should be the price of each share?
(Hint: Step 1: Find the discounted value of the firm's FCFEs using the constant-growht model and CAPM required return as the discount rate.
Step 2: Divide the total value of equity by the total number of shares outstanding to find the price per share).
The price of each share should be_____(round to the nearest cent)