17 Which is a characteristic of the price of preferred stock? Since preferred st
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Question
17 Which is a characteristic of the price of preferred stock?
Since preferred stock dividends are fixed, they are tax deductible.
Because preferred stock has no maturity, the price analysis is similar to that of debt.
Preferred stock is valued as a perpetuity.
None of these.
16 An issue of preferred stock is paying an annual dividend of $1.50. The growth rate for the firm's common stock is 5%. What is the preferred stock price if the required rate of return is 7%?
$21.43
$30.00
$22.50
None of these
10 An issue of preferred stock is paying an annual dividend of $2.00. The growth rate for the firm's common stock is 6%. What is the preferred stock price if the required rate of return is 11%? (Round your answer to 2 decimal places.)
$23.18
$18.18
$20.68
$15.68
9 A dollar today is worth more than a dollar to be received in the future because
rev: 07_06_2011
a stated rate of return is guaranteed on all investment opportunities.
the dollar can be invested today and earn interest.
inflation will increase the purchasing power of a future dollar.
None of these.
Since preferred stock dividends are fixed, they are tax deductible.
Because preferred stock has no maturity, the price analysis is similar to that of debt.
Preferred stock is valued as a perpetuity.
None of these.
Explanation / Answer
17. Preferred stock is valued as a perpetuity.
16. None of these
Stock price=1.5*(1.05)/(7-5)=78.75
10.stock price=2/(11-6)=40
9.inflation will increase the purchasing power of a future dollar.
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