User Account

All Pages

What is required rate of return on preferred stock

Assignment Help Financial Management
Reference no: EM131316020

1. A company currently pays a dividend of $1 per share (D0 = $1). It is estimated that the company's dividend will grow at a rate of 17% per year for the next 2 years, then at a constant rate of 6% thereafter. The company's stock has a beta of 1.6, the risk-free rate is 6%, and the market risk premium is 5%. What is your estimate of the stock's current price? Round your answer to the nearest cent

2. Current and projected free cash flows for Radell Global Operations are shown below. Actual 2013 2014 Projected 2015 2016 Free cash flow $608.40 $669.08 $709.13 $765.86 (millions of dollars) Growth is expected to be constant after 2015, and the weighted average cost of capital is 10.05%. What is the horizon (continuing) value at 2016 if growth from 2015 remains constant? Round your answer to the nearest dollar. Round intermediate calculations to two decimal places.

3. Crisp Cookware's common stock is expected to pay a dividend of $2 a share at the end of this year (D1 = $2.00); its beta is 0.90; 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 $25 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 )? Do not round intermediate steps. Round your answer to the nearest cent.

4. What is the required rate of return on a preferred stock with a $50 par value, a stated dividend of 10% of par, and a current market price of (a) $51, (b) $83, (c) $119, and (d) $148 (assume the market is in equilibrium with the required return equal to the expected return)? Round the answers to two decimal places. % % % %

Reference no: EM131316020

Questions Cloud

What is the monthly payment before and after the buy down : An interest buydown program offers ro reduce interest rates by 4% from the base rate. Suppose the base rate for a loan os $8000 is 8% for 10 years. What is the monthly payment before and after the buy down? In this case, use monthly compounding, that..
Sketch voltage-transfer characteristic of a buffer : What is the minimum gain a must exhibit over the forbidden zone in order to obey the static discipline with this convention?
What is current dollar price assuming : Harrison Co. issued 14-year bonds one year ago at a coupon rate of 6.9 percent. The bonds make semiannual payments. If the YTM on these bonds is 5.5 percent, what is the current dollar price assuming a $1,000 par value?
What is a bfoq under the civil rights act : If you are an attorney representing a mixed race candidate to be Chief Human Resource Manager for a Coffee Manufacturer, who was fully qualified for the position but has been turned down for it, and an apparently less qualified white male has be..
What is required rate of return on preferred stock : What is the required rate of return on a preferred stock with a $50 par value, a stated dividend of 10% of par, and a current market price of (a) $51, (b) $83, (c) $119, and (d) $148 (assume the market is in equilibrium with the required return equal..
How does it continue to remain relevant to our lives : Your opinion on the role of art today; how does it continue to remain relevant to our lives? How could it change or develop to become more relevant to our lives?
How has the current economic environment impacted growth : Why is it the case that many small business owners in the United States traditionally gave little thought to exporting? How has the current economic environment impacted growth opportunities for small and medium-sized businesses
What are nucos net purchases : Assume that the ceiling for each unit is $33 and the floor is $27. What per unit amount will TiCo use for ending inventory on its balance sheet - What is JaCos ending inventory applying LCM by item?
Discuss about the law enforcement challenges : Explain, in detail, what you believe to be the greatest challenge facing law enforcement agencies investigating exploitation, cyber stalking, and obscenity. Provide a rationale for your response.Identify the specific challenges that overlapping o..

Reviews

Write a Review

Financial Management Questions & Answers

  How does this factor affect settlement prices

Since their introduction, stock index futures contracts have become very popular and are now widely traded by finance professionals. Many factors, including (1) the current price of the underlying stock index, (2) the time to contract maturity, and (..

  The bonds make semiannual payments-risk-free rate

You are given the following information for Huntington Power Co. Assume the company’s tax rate is 35 percent. Debt: 6,000 7.3 percent coupon bonds outstanding, $1,000 par value, 15 years to maturity, selling for 109 percent of par; the bonds make sem..

  Business loan with an annual effective rate

A $1, 000, 000 business loan with an annual effective rate of 15% is being repaid with annual payments of $200, 000 plus a smaller final payment. The first payment is due one year after the loan is taken out. Determine the interest portion of the fin..

  The use of derivative financial instruments

The company employs a number of strategies to manage these risks, including the use of derivative financial instruments. Derivatives involve the risk of non-performance by the counterparty.

  Cash flows from assets

Wolverine, Inc. has revenues of $250, 000, earnings before interest and taxes of $134, 000, depreciation of $3, 000, and taxes of $53.6, 000. Last years' net working capital totaled $30, 000. The change in net fixed assets was $5, 000 for this year. ..

  Managements opportunity cost of funds

The ACME Parcel Service is considering the purchase of a delivery truck costing $40,000 and generating cash inflows of $8,000 every year while still in operating condition. If management's opportunity cost of funds is 12 percent, how long must the tr..

  About the retirement fund each year

Assume Mr. Prudent pays $2,500 into his retirement fund each year from age 35 to age 65. After age 65, Mr. P will withdraw a fixed amount each year for 20 years until he is 85 years old. Assume his investments will earn 5% for the next 30 years, and ..

  What is average accounts receivable figure

Skye Flyer, Inc., has weekly credit sales of $18,800, and the average collection period is 51 days. What is the average accounts receivable figure?

  To hedge the interest-rate risk on these bonds

The portfolio you manage is holding $5 million of treasury bonds with a 7% coupon rate and 5 years to maturity with a price of $98 (per $100 face value). To hedge the interest-rate risk on these bonds over the coming year, should you buy call or put ..

  Calculate the current price

Calculate the current price of a $1,000 par value bond that has a coupon rate of 11 percent, pays coupon interest semi-annually, has 21 years remaining to maturity, and has a current yield to maturity (discount rate) of 21 percent.

  Positive correlation between risk and return

Over the past 84 years, we have observed that investments with the highest average annual returns also tend to have the highest standard deviations of annual returns. This observation supports the notion that there is a positive correlation between r..

  Report annual cash flows

Briefly explain why you are using the computational method chosen. (Hint: you will need to decide to use the APV or WACC formula.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd