Answer:
(a) $4.2
(b) $5.6
(c) $2.8
(d) $2.45
(e) $2.1
(f) $1.05
Explanation:
Given that,
Total amount of capital raised from the sale of preferred stock = $35 million
Number of shares = 1 million
Price per share = Total capital raised ÷ Number of shares
= $35 million ÷ 1 million
= $35 per share
(a) If a Expected rate of return = 12 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.12
= $4.2
(b) If a Expected rate of return = 16 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.16
= $5.6
(c) If a Expected rate of return = 8 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.08
= $2.8
(d) If a Expected rate of return = 7 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.07
= $2.45
(e) If a Expected rate of return = 6 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.06
= $2.1
(f) If a Expected rate of return = 3 percent
Annual dividend = Price per share × Expected Rate of return
= $35 per share × 0.03
= $1.05
