Answer:
a. Net income for 2021 $1,600,000
Less: Preferred dividends <u>$120,000 </u> (40000*$3)
Net income for Common Stockholders $1,480,000
Divide by Common Shares outstanding <u>600,000 </u>
Basic Earnings per share for 2021 <u>$2.47 </u>
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b. If company's preferred stock were convertible into common stock, diluted earnings per shares will also have to be calculated.
Answer:
1. C. $33.76 per share
2. B- The constant growth model can be used if a stock's expected constant growth rateis less than its required return
3. 8.25% ; $35.62 ; 5.5%
Explanation:
1. Using the Constant Growth Model to calculate the intrinsic value would be best given the above values.
The formula is;
Value = Next Dividend / (Required Return - Growth rate)
Value = (2.64 * ( 1 + 5.5%)) / ( 13.75% - 5.5%)
Value = 2.7852/8.25%
Value = $33.76
2. Going by the formula, if the expected growth rate is more than the required return, the intrinsic value would be a negative number and a stock's price cannot go below 0. The growth rate has to be less than the required return for this to work.
3. At Equilibrium, the stock dividend is growing as it should.
Dividend Yield should therefore be;
= Next Dividend / Stock Value * 100
= (2.7852 / 33.76) * 100
= 8.25%
Stock Price should grow at the growth rate so;
= 33.76 * ( 1 + 0.055)
= $35.62
Gains yield refers to what rate the stock will change in value. Growth rate is 5.5% so that will be the answer.
Answer:
$1,943.06
Explanation:
Monthly mortgage payment: $6.6 X $229 = $1,511.4
Monthly property taxes: $1,550/12 = $129.16
Monthly property insurance: $630/12 =$52.5
Monthly association fee: $250
Total monthly housing payment: $1,943.06
