1. PREFERRED STOCK VALUATION

Farley Inc. has perpetual preferred stock outstanding that sells for $50.00 a share and pays a dividend of $4.00 at the end of each year. What is the required rate of return? Round your answer to two decimal places. %

2. CONSTANT GROWTH VALUATION

Tresnan Brothers is expected to pay a $3.9 per share dividend at the end of the year (i.e., D1 = $3.9). The dividend is expected to grow at a constant rate of 3% a year. The required rate of return on the stock, rs, is 10%. What is the stock's current value per share? Round your answer to two decimal places. $