Question: Problem 1: You work for a firm with an issue of 40,000 bonds outstanding and 5,000,000 of market value in preferred stock that sells to yield 6%. What is the value of the preferred stock if it pays a $5 dividend?
Problem 2: The common stock has a market value of $50 per share with 100,000,000 shares outstanding. If the growth rate is 6% per annum and the earnings are $ 4 per share. What is the required rate of return of the common stock?
Problem 3: Assume the capital structure as in 1 and 2 above. What is the market rate if the bonds sell for $1075 per bond?
Please show all work.