Question

11. Braam Fire Prevention Corp, has sales of $3,000, total assets of $2.500, and a profit margin of percent The firm has a total debt ratio of 40 percent. What is the return on equity? A. 2.4 percent B. 8.4 percent C. 10 percent D. 12 percent E 15 percent 12. Teder Corporation stock is expected to pay $3.51 dividends per share next year. The market requires a 12 percent return on the firm's stock. If the company maintains a constant 7 percent growth rate in dividends, Teder Corporation stock currently sells for per share. A. $59.9 B. $64.1 C. 568.6 D. $70.2 E. $75.1 13. A preferred stock is expected to pay dividend of $5 per year forever. Given a required rate of return of 10%, what is the current value of the preferred stock? ASS B. SSO C. S100 D. $500 E. $1,000,000 14. Crystal Glass recently paid $3.60 as an annual dividend. Future dividends are projected at $3.80, 54.10. and $4.25 over the next three years, respectively. Beginning in the fourth year, the dividend is expected increase by 3.25 percent annually. What is one share of this stock worth to you today if you require a l' percent rate of return on similar investments? A. 42.92 B. 43.40 C. 45.12 D 45.88 E. 46.50 15. JoyFM Inc, just paid $1.34 to their shareholders as the annual dividend. Simultaneously, the compa announced that future dividends will be increasing by 4.5 percent. If the current price of Joy FM Inc is 40, the required rate of return on common stock is A. 7.00 percent B. 7.85 percent C. 8.00 percent D. 8.16 percent E. 9.00 percent

Answer 1

Return on Equity = Sales x Profit Ratio x) Total Assets (1- debt ratio) 3000 X 0.05 X100 2500 (1-0.40) 150 1500 X100 10 percent @ - [lo percent Stock Palice - De ghouth - 5.-0.07 - 3.51 3.51 0.12 -0.07 0.05 $ 70.2 Value of Preferred Stock = Annual dividend d retun = $5 0.10 - $50 By → required return is Cropped so solving is not possible. ® Required return = (Do (159) x 100) + egentlig - 1 341.049) x of + 454 - 8.00 percent