Explore BrainMass

Explore BrainMass

    Calculate value, dividend, required rate of return, dividend growth

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Calculate the value or the missing component for each of the following securities:

    Preferred Stock A: Dividend = $3.875, Required Rate of Return = 17%, Value = ?
    Preferred Stock B: Value = $78, Required Rate of Return = 24%, Dividend = ?
    Preferred Stock C: Value = $38.75, Dividend = $3, Required Rate of Return = ?

    Common Stock A: g = .09k = .15625, D = 2.00
    Common Stock B: g = .0625, k = .1275, D = 1.05
    Common Stock C: g = .05, k = .105, D = 3.50 (Dividend Growth = 10%)
    Common Stock D: g = .11, k = .20, D = 5.00 (Dividend Growth = 12%)

    © BrainMass Inc. brainmass.com June 4, 2020, 12:44 am ad1c9bdddf
    https://brainmass.com/business/beta-and-required-return-of-a-project/calculate-value-dividend-required-rate-return-357141

    Solution Preview

    Preferred stock is a perpetuity and its value is given as
    Value = Annual Dividend/Required return
    use the above equation to calculate the missing value
    1. Value = 3.875/17% = $22.79
    2. 78 = ...

    Solution Summary

    The solution explains how to calculate the missing values relating to dividend, required rate of return, dividend growth.

    $2.19

    ADVERTISEMENT