Graphical Designs is offering 15-15 preferred stock. The stock will pay an annual dividend of $15 with the first dividend payment occurring 15 years from today. The required return on this stock is 4 45 percent. What is the price of the stock today? Mutiple Choice O O O O $103 24 O 10543 670 10169 $33708

Graphical Designs is offering 15-15 preferred stock. The stock will pay an annual dividend of $15 with the first dividend payment occurring 15 years from today. The required return on this stock is 4 45 percent. What is the price of the stock today? Mutiple Choice O O O O $103 24 O 10543 670 10169 $33708

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 14P

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Crisp Cookware’s common stock is expected to pay a dividend of $3 a share at the end of this year (D1 = $3.00); its beta is 0.8. The risk-free rate is 5.2%, and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $40 a share. Assuming the market is in equilibrium, what does the market believe will be the stock’s price at the end of 3 years (i.e., what is )?
CALCULATING THE WACC Here is the condensed 2019 balance sheet for Skye Computer Company (in thousands of dollars): Skyes earnings per share last year were 3.20. The common stock sells for 55.00. last years dividend (D0) was 2.10, and a flotation cost of 10% would be required to sell new common stock. Security analysts are projecting that the common dividend will grow at an annual rate of 9%. Skyes preferred stock pays a dividend of 3.30 per share, and its preferred stock sells for 30.00 per share. The firms before-lax cost of debt is 10%, and its marginal tax rate is 25%. The firms currently outstanding 10% annual coupon rate, long-term debt sells at par value. The market risk premium is 5%, the risk-free rate is 6%, and Skyes beta is 1.516. The firms total debt, which is the sum of the companys short-term debt and long-term debt, equals 1.2 million. a. Calculate the cost of each capital component, that is, the after-tax cost of debt, the cost of preferred stock, the cost of equity from retained earnings, and the cost of newly issued common stock. Use the DCF method to find the cost of common equity. b. Now calculate the cost of common equity from retained earnings, using the CAPM method. c. What is the cost of new common stock based on the CAPM? (Hint: Find the difference between r1 and rs as determined by the DCF method, and add that differential to the CAPM value for rs.) d. If Skye continues to use the same market-value capital structure, what is the firms WACC assuming that (1) it uses only retained earnings for equity and (2) if it expands so rapidly that it must issue new common stock?
Central Staircase is offering preferred stock which is commonly referred to as 10-10 stock. This stock will pay an annual dividend of $10 a share starting 10 years from now. What is this stock worth to you today if you desire a 16 percent rate of return? O $14.48 O $16.43 $17.07 $17.84 O $18.21
E-Eyes.com just issued some new preferred stock. The issue will pay an annual dividend of $19 in perpetuity, beginning 11 years from now. If the market requires a 6 percent return on this investment, how much does a share of preferred stock cost today? Multiple Choice O $185.67 O $316.67 O $167.98 O $166.82 O $176.83
Graphical Designs is offering 5 - 5 preferred stock. The stock will pay an annual dividend of $5 with the first dividend payment occurring 5 years from today. The required return on this stock is 4.55 percent. What is the price of the stock today? Multiple Choice $91.97 $86.06 $109.89 $84.14 $87.97
PRE Utilities preferred stock has an annual dividend payment of $8, a stated (par) value of $100, and an effective maturity of 30 years. If similar preferred stock issues have market yields of 7 percent, what is the value of the preferred stock? (Round your answer to the nearest dollar.) $186 $112 $245 $100
E E-Eyes.com just issued some new preferred stock. The issue will pay an annual dividend of $16 in perpetuity, beginning 11 years from now. If the market requires a 12 percent return on this investment, how much does a share of preferred stock cost today? Multiple Choice $45.08 $133.33 $38.33 $40.78 R T U
App Inc plans to issue preferred stock with a perpetual annual dividend of 10% of par value and a par value of $25. If the required return on this stock is currently 8%, what should be the preferred stock’s market value? $28.50 $33.50 $37.25 $50.00 $31.25
A stock is expected to pay $0.80 per share every year indefinitely. If the current price of the stock is $18.90, and the equity cost of capital for the company that released the shares is 6.4%, what price would an investor be expected to pay per share five years into the future? OA. $22.90 OB. $21.23 OC. $20.43 O D. $22.65 O E. $12.50
Kelly Enterprises stock currently sells for $35.25 per share. The dividend is projected to increase at a constant rate of 9.75% per year. The required rate of return on the stock, rs, 11.50%. What is the stock's expected price 5 years from now? Select the correct answer. Ca. $58.93. Ob. $56.13 Oc. $58.23 Od. $56.83 Ce. $57.53
Mark Walker Inc plans to issue preferred stock with a perpetual annual dividend of $2 per share. If the required return on this stock is currently 8%, what should be the stock's market value? $25.00 $23.00 $26.00 $24.00 $22.00
Your broker has recommended that you purchase stock in ZZZ-Best, Inc. She estimates that the 1-year target price is $70, and ZZZ-Best consistently pays an annual dividend of $8. Based on your analysis, you estimate that the stock has a required rate of 18%. What is the intrinsic value of this stock? O $64.43 O $68.73 O $67.35 O $61.86 O $66.10