Question: 1. A bond that pays interest forever and has no maturity date is a perpetual bond. In what respect is a perpetual bond similar to a no-growth common stock, and to a share of preferred stock?
2. Thomas Brothers is expected to pay a $0.50 per share dividend at the end of the year (i.e., D1 $0.50). The dividend is expected to grow at a constant rate of 7 percent a year. The required rate of return on the stock, rs, is 15 percent. What is the value per share of the company's stock?