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1. Farley Inc. has perpetual preferred stock outstanding that sells for $44 a share and pays a dividend of $4.25 at the end of each year. What is the required rate of return? Round your answer to two decimal places.   = % 2. Holt Enterprises recently paid a dividend, D0, of $3.00. It expects to have nonconstant growth of 24% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 9%. a. How far away is the horizon date? The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. =  $   c. What is the firm's intrinsic value today,  ? Do not round intermediate calculations. Round your answer to the nearest cent. =  $

1. Farley Inc. has perpetual preferred stock outstanding that sells for $44 a share and pays a dividend of $4.25 at the end of each year. What is the required rate of return? Round your answer to two decimal places.   = % 2. Holt Enterprises recently paid a dividend, D0, of $3.00. It expects to have nonconstant growth of 24% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 9%. a. How far away is the horizon date? The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2. The terminal, or horizon, date is infinity since common stocks do not have a maturity date. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero. b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent. =  $   c. What is the firm's intrinsic value today,  ? Do not round intermediate calculations. Round your answer to the nearest cent. =  $

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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1. Farley Inc. has perpetual preferred stock outstanding that sells for $44 a share and pays a dividend of $4.25 at the end of each year. What is the required rate of return? Round your answer to two decimal places.

  = %

2. Holt Enterprises recently paid a dividend, D0, of $3.00. It expects to have nonconstant growth of 24% for 2 years followed by a constant rate of 4% thereafter. The firm's required return is 9%.

a. How far away is the horizon date?

  1. The terminal, or horizon, date is the date when the growth rate becomes nonconstant. This occurs at time zero.
  2. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the beginning of Year 2.
  3. The terminal, or horizon, date is the date when the growth rate becomes constant. This occurs at the end of Year 2.
  4. The terminal, or horizon, date is infinity since common stocks do not have a maturity date.
  5. The terminal, or horizon, date is Year 0 since the value of a common stock is the present value of all future expected dividends at time zero.

b. What is the firm's horizon, or continuing, value? Do not round intermediate calculations. Round your answer to the nearest cent.

=  $  

c. What is the firm's intrinsic value today,  ? Do not round intermediate calculations. Round your answer to the nearest cent.

=  $  

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