1. (Preferred Stock Valuation) What is the value of a preferred stock where the dividend rate is 13 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 12 percent.
2. (Preferred Stockholder Expected Return) Solitron preferred stock is selling for $53.77 and pays $1.75 in dividends. What is your expected rate of return if you purchase the security at the market price?
3. (Measuring Growth) Given that a firm's return on equity is 15 percent and management plans to retain 40 percent of earnings for investment purposes, what will be the firm's growth rate?
4. (Preferred Stock Valuation) Gree's preferred stock is selling for $25 in the market and pays a $275 annual dividend.
a. What is the expected rate of return of the stock?
b. If an investor's required rate of return is 10 percent, what is the value of the stock for the investor?
c. Should the investor acquire the stock?