b.MoonlightCorp has an outstanding preferred issue of stock with value of RM100 and an annual dividend of 10 percent (of par). Similar riskpreferred stocks are yielding 11.5 percent annual rate of return.)i) What is the current value of the outstanding preferred stocka par?
BMMF5103 ASSIGNMENT)ii) What will happen to the price of the preferred stock as the risk-free rateincreases? Explain.c.The CenturyMotel Ltd. has been very successful in the past four years. Overthese years, it has paid common stock dividend of RM4 in the first year, RM4.20in the second year, RM4.41 in the third year, and its most recent dividend wasRM4.63. The company is expected to continue this dividend growth indefinitely.What is the value of the company’s stock if the required rate of return is 12percent?(d.You are given the following data:•The risk-free rate is 5 percent.•The required return on the market is 8 percent.•The expected growth rate for the firm is 4 percent.•The last dividend paid was RM0.80 per share.
BMMF5103 ASSIGNMENT•Beta is 1.3.Now assume the following changes occur:•The inflation premium drops by 1 percent.•An increased degree of risk aversion causes the required return on themarket to go to 10 percent after adjusting for the changed inflationpremium.•The expected growth rate increases to 6 percent.•Beta rises to 1.5.What will be the change in price per share, assuming the stock was in equilibriumbefore the changes?