1. What is the price of a share of preferred stock that has a
dividend of $3 if the cost of preferred
(rp) is 15%
2. What would you pay for a share of common stock if you expect
the next dividend to be $3
and you expect to sell it in one year for $25, assuming the cost of
equity (re) is 15%.
1.Price of preferred stock=annual dividend/cost of preferred stock
=(3/0.15)
=20
2.Current price=Future dividends and value*Present value of discounting factor(rate%,time period)
=3/1.15+25/1.15
=$24.35(Approx).
1. What is the price of a share of preferred stock that has a dividend of...
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