The question needs to be answered in a form of an essay Tech Temps has an...
The question needs to be answered in a form of an essay
Tech Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal to $10 each year. If the appropriate required rate of return for this stock is 8%, what is its market value?
Homework Answers
The market value is the present value of future cash flows arising from an asset. In this case, the preferred stock is the asset and the present value of cash flows determines its price. Present value is the pv of annuity in this case which is computed as Cash flow/Rate
= $10/ 8%
= $125
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The question needs to be answered in a form of an essay
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