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Author Question: LTM, Inc. has an issue of preferred stock whose par value is 1,000. The preferred stock pays a 4.5 ... (Read 46 times)

cookcarl

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on: Jul 10, 2018
LTM, Inc. has an issue of preferred stock whose par value is 1,000. The preferred stock pays a 4.5
  dividend. If investors require a 5.5 rate of return for these shares, what price should the preferred
  stock sell for?
 
  A) 611.11 B) 508.33 C) 818.18 D) 409.09

Question 2

Based on analysis of the company and expected industry and economic conditions, China Imports is expected to earn 4.60 per share of common stock next year. The average price/earnings ratio for firms in the same industry is 8.
 
  Calculate the estimated value of a share of China Imports common stock.


meryzewe

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Reply #1 on: Jul 10, 2018
Answer to Question 1

C

Answer to Question 2

Estimated value of share price = 4.60  8 = 36.80 per share


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