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    Issue preferred stock at what price; NPV & IRR of projects

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    Mark Walker Inc plans to issue preferred stock with a perpetual annual dividend of $2 per share and a par value of $25. If the required return on this stock is currently 8%, what should be the stock's market value?

    a. $22.00

    b. $23.00

    c. $24.00

    d. $25.00

    e. $26.00

    A firm with a cost of capital of 13 percent is evaluating three capital projects. The internal rates of return are as follows:

    Project Internal Rate of Return
    1 12%
    2 15
    3 14

    The firm should __________.

    a- accept Project 2 and reject Projects 1 and 3
    b- accept Projects 2 and 3 and reject Project 1
    c- accept Project 1 and reject Projects 2 and 3
    d- accept Project 3 and reject Projects 1 and 2


    A firm is evaluating an investment proposal which has an initial investment of $5,000 and cash flows presently valued at $4,000. The net present value of the investment is __________.

    A) -$1,000
    B) $0
    C) $1,000
    D) $1.25

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    Solution Preview

    1. The preferred stock is perpetuity and the price is calculated as Annual Dividend/Required return. The annual dividend is $2 and the required return is 8%
    Market value of stock = 2/8% = ...

    Solution Summary

    The solution explains some multiple choice questions relating to capital budgeting