Required rate of return for the common stock

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a. Calculate the value of each security based on your required rate of return.

b. Which investment(s) should you accept? Why?

c. If your required rates of return changed to 14 percent for the bond, 16 percent for the preferred stock, and 18 percent for the common stock, how would your answers change to parts (a) and (b)?

d. Assuming again that your required rate of return for the common stock is 20 percent, but the anticipated constant growth rate changes to 12 percent, would your answers to parts (a) and (b) be different?

Reference no: EM131041676

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