FINANCIAL MARKETS AND INSURANCE

Which do you think is more risky for a firm trying to raise capital - an underwritten offering or a best-efforts offering? Give an example and explain the differences in detail

General Cereal common stock dividends have been growing at an annual rate of 7 percent per year over the past 10 years. Current dividends are $1.70 per share. What is the current value of a share of this stock to an investor who requires a 12 percent rate of return if the following conditions exist?

a. Dividends are expected to continue growing at the historic rate for the fore- seeable future.

b. The dividend growth rate is expected to increase to 9 percent per year.

c. The dividend growth rate is expected to decrease to 6.5 percent per year.