Abigail Neri

Module 7 Assignment

PT -

3 Preferred Dividends

case

A current
quarter Dividend $4
Add : Dividends in Arrears # ( $443)
total Dividends $16
=

B Dividend per share per period $110 42%

=
$2.2
=
dividends →
Preferred
per share must be paid ( only the latest

quarter )
C
$2 ←
preferred dividend per
.

share that must be paid

the
( onlyquarter
latest
)

D .
current
quarter Dividend $0.9 ($60 xt5% )
Add : Dividends in Arrears 3 -
6
( $0 -9×4 )
total Dividends $4.5
=

E .

current
quarter Dividend $2.1 ( $70 x 3% )
→ =
preferred dividends

per share must be paid ( only the latest

since there is no dividends in quarter )
Arrears
M -

9 Common stock valuation : constant Growth

Given :
D, $0.72 7%
g
= -

a .

rs
=
10%

Do =
Di
rs g
-

$0.72 $24 is the amount that I will

if
=
0.10 the
0.07
pay for stock the
-

is
0.72
required return logo .

=
O -

03

=
$24
T

b -

Rs
=
8%

Po =
Di
rs g
-

$0.72 I will willing to $72 for

.

be
pay
the stock if required
=
0-08-0.07 the return

0722 is 8% .

O -

01

=
$72
t

C .

One disadvantage of constant growth model is where

it assumes that dividends will grow at a constant

rate it disregards the changing economic conditions

-

that bear impact to the risks the dividend holders hold .