1. Walter Inc. had net income of $350,000, debt-equity ratio of 0.5, book value of assets of $5 million, and 100,000 common shares outstanding. The company just paid a dividend per share of $2. What is Walter’s estimated growth rate?
2. An issue of preferred shares has a par value of $95 per share, with a dividend on par of 8%. If the preferred shares are currently selling for $150 per share, what is the percentage cost of preferred shares?
3. The current price of Natasha Corporation stock is $5.17. In each of the next two? years, this stock price can either go up by $2.50 or go down by $2.00. The stock pays no dividends. The? one-year risk-free interest rate is 4.4% and will remain constant. Using the Binomial Model, calculate the price of a two-year put option on Natasha stock with a strike price of $7.00.