Author Question: Miller's preferred stock is selling at 54 on the market and pays an annual dividend of 4.20 per ... (Read 110 times)

cagreen833 · **on:** Jul 10, 2018

Miller's preferred stock is selling at 54 on the market and pays an annual dividend of 4.20 per share.

a. What is the expected rate of return on the stock?
b. If an investor's required rate of return is 9, what is the value of the stock to that investor?
c. Considering the investor's required rate of return, does this stock seem to be a desirable investment?

Question 2

Which of the following is a reason for international investment?

A) to gain an advantage in a foreign country B) to increase P/E ratio
C) to reduce portfolio risk D) to gain access to foreign currency

dellikani2015 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

a. R = D/V
R = 4.20/54
R = 7.78
b. V = D/R
V = 4.20/.09
V = 46.67
No, it is not a desirable investment because the current selling price exceeds the value to the investor.

Answer to Question 2

C