Miller/Hershey's Preference Shares Are Selling at $54 on the Market

question 60

Essay

Miller/Hershey's preference shares are selling at $54 on the market and pay an annual dividend of $4.20 per share.
a.What is the expected rate of return on the shares?
b.If an investor's required rate of return is 9%, what is the value of the shares for that investor?
c.Considering the investor's required rate of return, does this share seem to be a desirable investment?

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Definitions:

Mania

A mental state characterized by extreme energy, euphoria, hyperactivity, and a reduced need for sleep, often seen in bipolar disorder.

Hypomania

A milder form of mania, characterized by elevated or irritable mood, increased activity or energy levels, but not severe enough to cause significant impairment.

Depression

A common mental disorder characterized by persistent sadness, loss of interest, and a lack of energy or drive, often accompanied by physical symptoms.

Rapid Cycling

A term in bipolar disorder characterized by four or more episodes of mania, hypomania, or depression within a year.