X-Centric Energy Company has issued perpetual preferred stock with a stated (par) value of 195 and...

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X-Centric Energy Company has issued perpetual preferred stock with a stated (par) value of 195 and...

X-Centric Energy Company has issued perpetual preferred stock with a stated (par) value of 195 and a dividend of 5.5 percent. If the required rate of return is 10.6 percent, what is the stock’s current market price?

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Answer 1

Answer #1

Information provided:

Par value= $197

Preferred dividend= 5.50%

Required rate of return= 10.5%

Annual dividend is computed using the below formula:

Dividend rate*Par value

= 0.0550*$197

= $10.8350

The current market price of the stock is computed using the below formula:

= Annual dividend/ required rate of return

= $10.8350/ 0.106

= $102.2170 $\rightarrow$ $102.22.

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Answer 2

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X-Centric Energy Company has issued perpetual preferred stock with a stated (par) value of 195 and...

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