Reading 40: Discounted Dividend Valuation-LOS h 习题精选 annual, discount, stock, style, center

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Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 40: Discounted Dividend Valuation

LOS h: Calculate the value of noncallable fixed-rate perpetual preferred stock given the stock's annual dividend and the discount rate.

 

 

 

What is the value of a fixed-rate perpetual preferred share (par value $100) with a dividend rate of 7.0% and a required return of 9.0%?

A) $71.

B) $56.

C) $78.

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The value of the preferred is $78:

V₀ = ($100par × 7%) / 9% = $77.78

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A $100 par, perpetual preferred share pays a fixed dividend of 5.0%. If the required rate of return is 6.5%, what is the current value of the shares?

A) $76.92.

B) $100.00.

C) $88.64.

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The current value of the shares is $76.92:

V₀ = ($100 × 0.05) / 0.065 = $76.92

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If the value of an 8%, fixed-rate, perpetual preferred share is $134, and the par value is $100, what is the required rate of return?

A) 8%.

B) 6%.

C) 7%.

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The required rate of return is 6%: V₀ = ($100par × 8%) / r = $134, r = 5.97%

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What is the value of a fixed-rate perpetual preferred share (par value $100) with a dividend rate of 11.0% and a required return of 7.5%?

A) $147.

B) $152.

C) $138.

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The value of the preferred is $147:

V₀ = ($100par × 11%) / 7.5% = $146.67