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    Thompson 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

    Companies A and B each reported the same earnings per share (EPS), but Company J?s stock trades at a higher price. Which of the following statements is correct?

    a. Company A must have a higher P/E ratio.

    b. Company A must have a higher market-to-book ratio.

    c. Company A must be riskier.

    d. Company A must have fewer growth opportunities.

    e. Company A must pay a lower dividend

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    Solution Preview

    Thompson 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?
    Market value of stock = Perpetual Annual dividend / required rate of return
    =$2/8%=$25

    d. $25.00

    Companies A and B each ...

    Solution Summary

    Stock and market values are determined.

    $2.49

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