Reading 60: Equity Valuation: Concepts and Basic Tools-LOS d

Calculate the value of a preferred stock that pays an annual dividend of $5.50 if the current market yield on AAA rated preferred stock is 75 basis points above the current T-Bond rate of 7%.

If a preferred stock that pays a $11.50 dividend is trading at $88.46, what is the market’s required rate of return for this security?

The yield on a company’s 7.5%, $50 par preferred stock is 6%. The value of the preferred stock is closest to:

Assuming a discount rate of 15%, a preferred stock with a perpetual dividend of $10 is valued at approximately:

A company has 8 percent preferred stock outstanding with a par value of $100. The required return on the preferred is 5 percent. What is the value of the preferred stock?

A company has 6% preferred stock outstanding with a par value of $100. The required return on the preferred is 8%. What is the value of the preferred stock?

What is the value of a preferred stock that is expected to pay a $5.00 annual dividend per year forever if similar risk securities are now yielding 8%?

The preferred stock of the Delco Investments Company has a par value of $150 and a dividend of $11.50. A shareholder’s required return on this stock is 14%. What is the maximum price he would pay?