1. Ayden, Inc., has an issue of preferred stock outstanding that pays a $5.55 di

Question

1.

Ayden, Inc., has an issue of preferred stock outstanding that pays a $5.55 dividend every year, in perpetuity. This issue currently sells for $92 per share.

%

2.

The Germinating Flower Co. has earnings of $2.00 per share. The benchmark PE for the company is 13.

What stock price would you consider appropriate? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

3.

You have found the following stock quote for RJW Enterprises, Inc., in the financial pages of today

Ayden, Inc., has an issue of preferred stock outstanding that pays a $5.55 dividend every year, in perpetuity. This issue currently sells for $92 per share.

Explanation / Answer

1. Required return = 5.55/92= 6.03%

  Required return

6.03%

2.    P/E = 13

P = 2*13= 26

  Stock price

$26.00   

What if the benchmark PE were 16? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

  Stock price

$32   

3.

You have found the following stock quote for RJW Enterprises, Inc., in the financial pages of today

  Required return

6.03%

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