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Cannon Corp is considering issuing additional preferred and common shares in order to raise capital...

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Finance

Cannon Corp is considering issuing additional preferred and common shares in order to raise capital for the construction of a new warehouse. Their preferred shares currently pay an annual dividend of $8.50 per share, with investors requiring a return of 12%. Their common stock paid a dividend of $5.00 per share last year and it is expected that earnings and dividends will grow by 20% for the next three years before dropping to a constant rate of 10% thereafter. The required rate of return for common shareholders is 15%. Required: Determine the current price of the companys preferred and common shares. (10 marks)

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