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    Determining Value of Preferred and common stock

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    A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of the firm's common stock is ______.
    $120
    $10
    $12
    $100

    A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 16 percent. The value of the preferred stock is _____.
    $64
    $16
    $25
    $50

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    Solution Preview

    A firm has an expected dividend next year of $1.20 per share, a zero growth rate of dividends, and a required return of 10 percent. The value of a share of ...

    Solution Summary

    The solution explains the formula for determining value of common (with zero growth of dividend) and preferred stock.

    $2.19

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