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

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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%)

#### 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