1. Farley Inc. has perpetual preferred stock outstanding that sells for $46.00 a share and pays a dividend of $5.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places.
2. If Poppyseed, Inc. is expected not to pay dividends at all for the next 5 years, then expected to pay $15 in dividends for seven years, and then after that the dividends are expected to grow at a 1.8% rate indefinitely, what would you be willing to pay for a share of stock if the required return is 3.8 percent?