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Business Finance Corporate Finance: A Focused Approach (mindtap Course List)

A To compute: Rate of return when the market value is 30 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. Rate of return = Dividend Market value 11.66% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 30 The dividend is computed as: Dividend = Parvalue×Dividendrate = $50×7% = $3 .5 Rate of return = $3 .5 $30 =11 .66% B To compute: Rate of return when the market value is 40 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 8.75% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 40 Rate of return = $3 .5 $40 = 8 .75% C To compute: Rate of return when the market value is 50 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 7% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when market value is 50 Rate of return = $3 .5 $50 = 7 .0% D To compute: Rate of return when the market value is 70 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 5% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 70 Rate of return = $3 .5 $70 = 5 .0%

A To compute: Rate of return when the market value is 30 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. Rate of return = Dividend Market value 11.66% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 30 The dividend is computed as: Dividend = Parvalue×Dividendrate = $50×7% = $3 .5 Rate of return = $3 .5 $30 =11 .66% B To compute: Rate of return when the market value is 40 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 8.75% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 40 Rate of return = $3 .5 $40 = 8 .75% C To compute: Rate of return when the market value is 50 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 7% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when market value is 50 Rate of return = $3 .5 $50 = 7 .0% D To compute: Rate of return when the market value is 70 . Introduction: The rate, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time is referred to as the rate of return. 5% Given: Par value of Preferred stock =$50 Annual dividend rate =7% of par Computation of Rate of return when the market value is 70 Rate of return = $3 .5 $70 = 5 .0%

Solution Summary: The author explains the rate of return, which helps to determine the profit and loss which is earned by the investor in investment within a specified period of time.

Corporate Finance: A Focused Approach (mindtap Course List)

Corporate Finance: A Focused Approach (mindtap Course List)

7th Edition

ISBN: 9781337909747

Author: Michael C. Ehrhardt, Eugene F. Brigham

Publisher: South-Western College Pub

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Concept explainers

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the r…

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Chapter 7, Problem 16P

Chapter 7, Problem 18P

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You are called in as a financial analyst to appraise the bonds of Ollie’s Walking Stick Stores. The $5,000 par value bonds have a quoted annual interest rate of 8 percent, which is paid semiannually. The yield to maturity on the bonds is 12 percent annual interest. There are 12 years to maturity. a. Compute the price of the bonds based on semiannual analysis. b. With 8 years to maturity, if yield to maturity goes down substantially to 6 percent, what will be the new price of the bonds?

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Corporate Finance: A Focused Approach (mindtap Course List)

Ch. 7 - Prob. 17P

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