Assuming the company takes on the project (even if you recommended that you don\

Question

Assuming the company takes on the project (even if you recommended that you don't take on the project in), calculate the rate of increase or decrease from the current stock price in the market for the company's common shares. The Great Company Ltd. has $5,000, 000 of $100 par value preferred shares issued and outstanding. The preferred shares pay a $10.00 dividend on June 17 each year and investors $10.00 dividend on June 17 each year and investors require a rate of return of 8 percent. a. If there is no maturity date, what is the expected price of the preferred share in the market June 17, 2016? b. If there is a maturity date of June 17, 2021, what is the expected price of the preferred share in the market on June 17, 2016?

Explanation / Answer

Ans: Expected market price if no maturity date Price= 10/.08 125 Therefore price shall be 125 Ans: Expected price with market date 10(PVAF 8%,5years)+100(PVAF 8%,5th year) 10*3.9927+100*.6806 107.987

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