EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 7, Problem 17P
Summary Introduction

To determine: Value of share of a stock.

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Farley Inc. has perpetual preferred stock outstanding that sells for $30 a share and pays a dividend of $2.75 at the end of each year.  What is the required rate of return?
Simtek currently pays a $3.5 dividend (D0) per share. Next year’s dividend is expected to be $4 per share. After next year, dividends are expected to increase at a 8 percent annual rate for 3 years and a 3 percent annual rate thereafter. Use Table II to answer the questions. Do not round intermediate calculations. Round your answers to the nearest cent. What is the current value of a share of Simtek stock to an investor who requires a 16 percent return on his or her investment?$   If the dividend in year 1 is expected to be $4 and the growth rate over the following 3 years is expected to be only 5 percent and then 3 percent thereafter, what will the new stock price be?$
Smiling Elephant, Inc., has an issue of preffered stock outstanding that pays a $5.00 dividend every year, in perpetuity. If this issue currently sells for $80.10 per share, what is the required return?
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