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samualson samualson
wrote...
Posts: 2459
5 years ago
Miller's preferred stock is selling at $54 on the market and pays an annual dividend of $4.20 per share.
a.What is the expected rate of return on the stock?
b.If an investor's required rate of return is 9%, what is the value of the stock to that investor?
c.Considering the investor's required rate of return, does this stock seem to be a desirable investment?
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
Read 75 times
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Replies
wrote...
5 years ago
 
a.R=D/V
R=$4.20/54
R=7.78%

b.V=D/R
V=$4.20/.09
V=$46.67

No, it is not a desirable investment because the current selling price exceeds the value to the investor.
 
samualson Author
wrote...
5 years ago
Upwards Arrow Correct again
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