What is the common stock-red sky corporation

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Problem: Red Sky Corporation distributes stable dividends with a growth rate of 0.5% to their common stock holders semiannually. The market expects an annual return of 3% on the common stock issued by Red Sky Corporation. The previous dividend being distributed was $6 per share. (Note: You should know that, whenever unspecified, interest rates will be the quoted APR rates.)

(a) What is the common stock price today? What's the theoretical common stock price 5 years later?

(b) Red Sky Corporation also issued preferred shares (that pay constant dividends every year forever) with a stated value of $100 each and 5% dividend rate. If the required return on this preferred stock is 3.5%, what is the price?

Reference no: EM132477969

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