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NEW QUESTION: 1
Milton Manufacturing has an outstanding issue of preferred stock that pays a $1.15 annual dividend. This dividend is not assumed to change in the future, and similar investments are currently warranting a13.75% per year return. What is the value of Milton Manufacturing's preferred stock? Further, does this value represent a perpetuity or a finite series of cash flows?
A. $10.99; perpetuity
B. $10.99; finite series of cash flows
C. $33.33; finite series of cash flows
D. $8.36; perpetuity
E. $8.36; finite series of cash flows
Answer: D
Explanation:
Explanation/Reference:
Explanation:
Preferred stock is commonly valued as a perpetuity using the following equation: {P0 = [d1 / k]} Where: P0 = the price of the preferred stock at time 0, d1 = the annual dividend at t = 1, and k = the required rate of return.
In this example, the dividend is provided as an annual figure, so all of the necessary information has been given. The calculation of the value of this preferred stock is found as follows:
{P0 = [$1.15 / 0.1375] = $8.36.
Preferred stock is commonly valued as a perpetuity because there is no finite conclusion to the projected series of cash flows for a preferred stock. Unlike a bond, whose cash flows are characterized by a finite lifespan (i.e. the cash flows of a bond cease at maturity), the cash flows (dividends) produced by a preferred stock could theoretically last forever.

NEW QUESTION: 2
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Sie müssen eine Universal Windows Platform-App mit dem Namen App1 zur Liste der Unternehmensportal-Apps für alle Benutzer hinzufügen.
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Answer:
Explanation:

Erläuterung


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