Studio 55, Inc. has an issue of preferred stock that pays a dividend of $4.00. The...

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Studio 55, Inc. has an issue of preferred stock that pays a dividend of $4.00. The...

Studio 55, Inc. has an issue of preferred stock that pays a dividend of $4.00. The preferred stockholders require a rate of return on this stock of 9%. At what price should the preferred stock sell for? Round off to the nearest $0.10.

A. $44.40

B. $88.80

C. $62.50

D. $36.00

business finance

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Answer 1

Answer #1

Current value=Annual dividend/required rate

=4/0.09

which is equal to

=$44.40(Approx).

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Answer 2

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