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Unformatted text preview: 10% yield rate. 5. A preferred stock will pay a dividend of 100 today. Dividends are paid annually. The stock also provides that future dividends will increase at the rate of inflation. The stock is purchased to yield 8% and assuming an inflation rate of 3%. Calculate the price of the stock today (before payment of the dividend). 6. A company’s earnings for the year just ended were $5 per share. They expect their earnings to increase at 10% per year. Once their earnings exceed $10 per share, they will payout 75% as a dividend. Dividends are paid annually at the end of the year. Calculate the value of the stock to yield 15%. Answers 1. 2000 2. See book 3. 8.24% 4. 42 5. 2160 6. 60.44...
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This note was uploaded on 02/26/2012 for the course MA 373 taught by Professor Staff during the Fall '08 term at Purdue University-West Lafayette.
- Fall '08