Answered: Calculate the nominal rate of return on…

Calculate the nominal rate of return on a perpetual preferred stock with a par value of $200, a dividend of 9% of par value, and a current market price of $100.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 10P

See similar textbooks

Related questions

Q: What should you pay for a stock assuming you expect the following: a dividend of 1.50 paid at the…

A: The question is based on the concept of valuation of stock , the value of stock is calculated as…

Q: If flotation cost is 1%, what is the cost of preferred stock that sells for $81 per share and has a…

A: The cost of the preferred stock refers to the amount the pays in return for the gains it received by…

Q: What will be the nominal RoR on a perpetual preferred stock with a $100 par value, a stated dividend…

A: Par value = $100 Dividend rate = 7% Annual dividend = 100*0.07 = $7

Q: What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a…

A: Computation:

Q: Earley Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently…

A: The provided information are: Par value of preferred share = $100 Yield or return = 9% Annual…

Q: PREFERRED STOCK RATE OF RETURN What will be the nominal rate of return on a per- petual preferred…

A: Nominal rate of return = Dividend / Current market price Where, Dividend = Par Value * Dividend Rate…

Q: What is the rate of return on a preferred stock that has a par value of $50, a market price of…

A: Given details are : Par value of preferred stock = $50 Market price of preferred stock = $46.50…

Q: App Inc plans to issue preferred stock with a perpetual annual dividend of 10% of par value and a…

A: Given data, Dividend rate = 10% Par value of the stock = $25 Required return on stock (Current…

Q: Travis Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is…

A: cost of preference shares is given by dividend divided by after flotation cost of preference shares.

Q: A stock that pays an annual dividend of $0.58 per share has a current price of $31.75. Find the…

A: The dividend yield is a financial ratio which shows how much dividend is paid by the company…

Q: Calculate the value of a preferred stock that pays a dividend of $6 per share if your required rate…

A: In this problem we need to compute the value of preferred stock from following details: Annual…

Q: Calculate the range of returns that an investor would have expected to achieve 95 percent of the…

A: Given arithmetic means are normally distributed. We need to calculate the range of returns that an…

Q: what is the yield on a share of preferred stock, which has a $100 par value and is currently selling…

A: Given information: Par value of preferred stock is $100 Current price of stock is $140 Annual…

Q: What is the rate of return on a preferred stock that has a par value of $50, a market price of…

A: Rate of Return = Annual Dividend / Market Price

Q: A stock is expected to pay a $1.90 dividend. The expected return of the stock is 13.7% and dividends…

A: This Question is based on dividend discount model. We are required to calculate the value of stock

Q: If the required rate of return on preferred stock is 15% and that preferred stock sells for OMR 5…

A: The formula used is shown:

Q: Calculate the change in the current price of a common stock if the initial current price was $950,…

A: The company would be considering the change in price with a view to check on the growth of the…

Q: Suppose a stock pays 2.5 OMR annual dividends and the rate of return required by investors is 10…

A: Please refer to the image below.

Q: A firm has perpetual preferred stock outstanding with a par value of $10. The preferred stock pays…

A: Annual dividend =$2.80 Current stock price =$35

Q: stock is currently priced at 565 92 The company will pay a dividend of $2.88 next year and investors…

A: The cost of equity is calculated with the help of Gorden's Model as under Ke = D1 ÷ P0 + g D1 =…

Q: Avondale Aeronautics has perpetual preferred stock outstanding with a par value of $100. The stock…

Q: A stock that pays an annual dividend of $0.68 per share has a current price of $32.00. Find the…

A: Dividend yield is calculated to understand how much the company is paying out relative to its…

Q: The preferred stock of Axim Corp. is currently selling at $51.07. If the required rate of return is…

A: Answer Current price = $51.07 required rate of return = 11.7%

Q: what is the simple interest rate on the investment in this stock?

A: Total interest = (78 -30) +3.53 = 48+3.53 = 51.53 If this return is divided by the initial stock…

Q: Ritter Sports Industries has preferred stock outstanding with a par value of $100. The stock pays a…

A: Par value of the stock = $100 Quarterly dividend = $0.95 Current price = $71.25 Nominal rate of…

Q: ILK has preferred stock selling for 97 percent of par that pays an annual coupon of 6 percent. What…

A: Given, Coupon rate = 6% Stock selling for = 97% of par value = $97 Suppose Par value = $100

Q: If flotation cost is 1%, what is the cost of preferred stock that sells for $84 per share and has a…

A: given, F = 1% Price = $84 face value = $100 yield = 6.2%

Q: What will be the nominal rate of return on perpetual preferred stock with a $160 par value, a stated…

A: In the given question we need to compute the nominal rate of return on perpetual preferred stock.…

Q: Preferred Products has issued preferred stock with an annual dividend of $6.50 that will be paid in…

Q: What will be the nominal rate of return on a preferred stock with a $100 par value, a stated…

A: Given details are : Par value = $100 Dividend rate = 8% Dividend amount = $100 * 8% = $8 Current…

Q: What will be the nominal rate of return on a preferred stock with a $100 par value, a stated…

A: Cost of preferred stock = (par value * Dividend rate ) / ( nominal rate of return )

Q: ILK has preferred stock selling for 95 percent of par that pays an annual coupon of 9 percent. What…

A: The cost of preferred Stock is calculated with the help of following formula Cost of Preferred…

Q: please use Excel) Preferred stock B sells for $45 in the market and pays an annual dividend of…

A: Market price of share = $ 45 Annual dividend = $ 4.60

Q: Joker stock has a sustainable growth rate of 6 percent, ROE of 11 percent, and dividends per share…

A: Sustainable growth rate is the maximum growth rate that a company can achieve without going for…

Q: ILK has preferred stock selling for 95 percent of par that pays an annual coupon of 6 percent.…

A: To calculate the cost of preferred stock we will use the below formula Cost of preferred stock =…

Q: A stock that pays an annual dividend of 0.60$ per share has a current price of 32.00$. Find the…

A: Dividend yield refers to the ratio of the annual dividend to the current share price. The dividend…

Q: A stock has a market price of $33.45 and pays a $.95 dividend. What is the dividend yield?

A: Stock market = price Dividend =0.95 Dividend Yield= Annual dividend / price per share

Q: Earley Corporation issued perpetual preferred stock with an 8% annual dividend. The stock currently…

A: Preferred stock is part of firm’s capital on which fixed rate of dividend is paid. Preferred stock…

Q: Tando Airlines has preferred stock outstanding that has a par value equal to $100. Preferred…

A: Cost of preferred stock as follows: Cost of preferred stock = Dividend / Current price Cost of…

Q: Preferred Stock Rate of Return What is the required rate of return on a preferred stock with a $50…

A: Calculation of dividend:

Q: A preferred stock pays a constant divided of $4.66 per year. Assuming the required rate of return…

A: Preferred Stock is the stock that is issued by the company in order to raise its capital. These have…

Q: Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue…

Q: A share of common stock has just paid a dividend of P3.00. If the expected long-run growth rate for…

A: Given: Current dividend = P3.00 Growth rate = 15% Required return = 18%

Q: a stock is selling for 9.5 and pays dividend of 0.1 cents , growth rate is 0.035 what is the…

A: The formula used is shown:

Q: What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a…

A: Nominal rate of return (r) refers to the current dividend yield of an instrument. Dividend yield =…

Q: What is the value of a preferred stock

A: Preferred stocks is a type of equity. The holders of preferred stock will get preference over common…

Question

Calculate the nominal rate of return on a perpetual preferred stock with a par value of $200, a dividend of 9% of par value, and a current market price of $100.

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

Expert Solution