Eastern auto parts last dividend was d0 050 and the

Question

Compute and answer the following questions, showing your calculations for how you got the answer. Note that your calculations should be in 4 decimal places and the final response in percentages (for example, 0.1167 should be reported as 11.67%):

1. A share of preferred stock pays a quarterly dividend of $2.50. If the price of this preferred stock is currently $50, what is the simple annual rate of return?
2. Eastern Auto Parts' last dividend was D0 = $0.50 and the company expects to experience 5 percent constant growth for the future. Eastern has a required rate of return of 12 percent. What should be the present price per share of Eastern common stock?
3. A share of perpetual preferred stock pays an annual dividend of $10 per share. If investors require a 14 percent rate of return, what should be the price of this preferred stock? (Hint: Preferred stock is a special case of the Dividend Discount Model (DDM) for which the dividend growth, g, is zero.)
4. A share of preferred stock pays a dividend of $0.50 each quarter. If you are willing to pay $20.00 for this preferred stock, what is your simple (not effective) annual rate of return?
5. Auto Parts' last dividend was D0 = $1.90, and the company expects 7% growth for the foreseeable future at $20.83 current price. What should be the company's required rate of return for this common stock?