Author Question: Fuller Corp. stock just paid a dividend of 3.12. Fuller's dividend growth rate has averaged 3 ... (Read 111 times)

chandani · **on:** Jul 10, 2018

Fuller Corp. stock just paid a dividend of 3.12. Fuller's dividend growth rate has averaged 3 historically, and Fuller stock currently sells for 25. What is the required return on equity?

A) 3
B) 13
C) 12
D) 15
E) 16

Question 2

Sampson Supply Inc. has outstanding borrowings that include preferred stock.

One of these borrowings is (nonconvertible) preferred stock (cumulative) with a par value of 150 and an annual dividend rate of 4.50. This preferred stock is currently selling for 175 per share. What is the yield or return on this nonconvertible preferred stock?
What will be an ideal response?

Expo · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

E

Answer to Question 2

Answer: We first determine the annual dividend by multiplying the dividend rate against the par value: 150 0.045 = 6.75. Now, dividing this 6.75 annual dividend by the current price of 175.00, we get 0.03857, or about 3.86.