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Author Question: Caldwell Corp. has outstanding borrowings. One of these borrowings is nonconvertible preferred stock ... (Read 47 times)

Mollykgkg

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on: Jul 10, 2018
Caldwell Corp. has outstanding borrowings. One of these borrowings is nonconvertible preferred stock (cumulative) with a par value of 75 and an annual dividend rate of 8.25.
 
  This preferred stock is currently selling for 56.46 per share. What is the yield or return (r) on this preferred stock?
  A) 10.395
  B) 10.432
  C) 10.959
  D) 10.623

Question 2

The Bike Store orders 2000 worth of supplies every 30 days. If they take advantage of the 3/10 net 30 discount
  offered by their supplier, how much would they save over the year? Assume a 360-day year.
 
  What will be an ideal response?


jessicaduplan

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

Answer: C
Explanation: C) We first determine the annual dividend by multiplying the dividend rate against the par value: 75  0.0825 = 6.1875. Now, using the equation r = and dividing the 6.1875 annual dividend by the current price of 56.46, we get r = 0.109591, or about 10.959.

Answer to Question 2

3  2000 = 60 would be saved on each order twelve 30-day periods in the year
12  60 = 720 would be saved over the year


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