4. Assume a share of preferred stock pays an annual dividend of $12; the first dividend...

Question

Question

Answer 1

Answer #1

Solution :-

Conversion Ratio = 20

which means each preference shareholders gets 20 Shares

Value of Each Share = $7

Total Value of Shares receives = $7 * 20 = $140

And the Value of Dividend Received after 12 months = $12

Therefore the Preferred Price at yield 7% = ( $140 + $12 ) / (1 + 0.07) = $142.06

If there is any doubt please ask in comments

Answer 2

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