Compute cost of new preferred stock

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Reference no: EM131990895

1. Co. just paid a dividend of $1.30 on each share of its stock. The company expects that the dividends will increase at a constant rate of 4 percent per year in perpetuity. Investors require a 14 percent return on this company's stock. Calculate the current stock price. Calculate the stock price in three years. Calculate the stock price in 12 years.

2. JPR Company's preferred stock is currently selling for $28.00, and pays a perpetual annual dividend of $2.00 per share. Underwriters of a new issue of preferred stock would charge $3 per share in flotation costs. The firm's tax rate is 40%. Compute the cost of new preferred stock for JPR.

Reference no: EM131990895

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