Reading 42: Discounted Dividend Valuation-LOS g 习题精选 center, face, label, style, 2011

土豆妮

Session 11: Equity Valuation: Industry and Company Analysis in a Global Context
Reading 42: Discounted Dividend Valuation

LOS g: Calculate the value of noncallable fixed-rate perpetual preferred stock.

 

 

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.

---

 

The value of the preferred is $78:

V₀ = ($100par × 7%) / 9% = $77.78

土豆妮

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.

---

The value of the preferred is $147:

V₀ = ($100par × 11%) / 7.5% = $146.67

土豆妮

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) $100.00.

B) $88.64.

C) $76.92.

---

The current value of the shares is $76.92:

V₀ = ($100 × 0.05) / 0.065 = $76.92

土豆妮

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) 7%.

C) 6%.

---

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