?1. (Preferred stock expected return?) You are planning to purchase 200 shares of preferred stock and must choose between Stock A and Stock B. Stock A pays an annual dividend of $4.50 and is currently selling for $35. Stock B pays an annual dividend of $4.30 and is selling for $37. If your required return is 12.24 percent, which stock should you? choose?
What is the expected return of Stock? A? ?% (Round to two decimal? places.)
What is the expected return of Stock? B? ?% (Round to two decimal? places.)
If your required return is 12.24 percent, you should choose. ANSWER: None, Stock B, OR Stock A (CHOOSE FROM ONE)
Preferred stock differs from common stock in that
A. preferred stock investors have a higher required return than common stock investors.
B. preferred stock dividends are fixed.
C. common stock investors have a required return and preferred stock investors do not.
D. preferred stock usually has a maturity date.
?2. (Common stock valuation?) Schlumberger is selling for $ 66.34 per share and paid a dividend of $ 2.61 last year. The dividend is expected to grow at 2 percent indefinitely. What is the? stock's expected rate of? return? The? stock's expected rate of return is ?%. (Round to two decimal? places.)
?3. (Common stock valuation?) Herrera Motor Inc. paid a $3.25 dividend last year. At a constant growth rate of 3 percent, what is the value of the common stock if the investors require a rate of return of 22 percent? The value of the Herrera Motor common stock is $?(Round to the nearest? cent.)