What is the value of a preferred stock when the dividend rate is 16 percent on a $125 par value?
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 16 percent on a $125 par value? The appropriate discount rate for a stock of this risk level is 13 percent.
The value of the preferred stock is $ _______ . (Round to the nearest cent.)
(Preferred stock valuation) The preferred stock of Gandt Corporation pays a $3.75 dividend. What is the value of the stock if your required return is 14 percent?
The value of the preferred stock is $_______ per share. (Round to the nearest cent.)
Homework Answers
a)
Preferred Stock Dividend = Face value * Dividend rate = $125*16% =$20
Value of Preferred stock = Preferred stock dividend / Discount rate
Value of Preferred stock = $20/0.13 = $154
b)
Value of Preferred stock = $3.75/0.14 =$27
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