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Q1 Fee Founders has perpetual preferred stock outstanding that sells for $82 a share a and pays a dividend of $5 at the end of each year

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Q1 Fee Founders has perpetual preferred stock outstanding that sells for $82 a share a and pays a dividend of $5 at the end of each year. What is the required rate of return?

R= D/V = $5 \$82 =6.1%

Q2 Harrison Clothiers' stock currently sells for $42 a share. It just paid a dividend of $1 a share. The dividend is expected to grow at a constant rate of 6% a year. What is the required rate of return? What stock price is expected 1 year from now?

The stock price is P0=(1+g)=42(1.06)=44.52

Rate of retum

D1\p0+g =1(1.06) / 42 +6%= 8.5%