Capital Cities ABC, Inc. bonds with a par value of $1,000, that pays an 8.75 percent on its par value in interest, sells for $1,314, and matures in 12 years. Rate of return is 6%.

Southwest Bancorp preferred stock paying a dividend of $2.50 and selling for $25.50. Return on Investment is 7%.

Emerson Electric common stock selling for $36.75, with a par value of $5. The stock recently paid a $1.32 dividend and the firm’s earnings per share has increased from $1.49 to $3.06 in the past five years. The firm expects to grow at the same rate for the foreseeable future. Required rate of return is 15%.

Calculate the value of each investment based on your required rate of return. Which investment would you select? Why? Assume Emerson Electric’s managers expect an earnings downturn and a resulting decrease in growth of 3 percent. How does this affect your answers to parts a and b? What required rates of return would make you indifferent to all three options?

Capital Cities ABC, Inc bonds with the par value of $1,000, that pays an 8.75% on its par value in interest, sells for $1,314, and matures in 12 years, required rate of return is 6%, what is the value of the investment?