How much would you pay for a share of ACME preferred stock that promised a $3.60...
How much would you pay for a share of ACME preferred stock that promised a $3.60 annual dividend if your required rate of return for this category of asset is 12%?
Group of answer choices
A. $20
B. $30
C. $32
D. $48
Homework Answers
The price of ACME preferred stock is computed by using the below formula:
= Annual dividend / required rate of return
Annual dividend = $ 3.60
Required rate of return = 12% or 0.12
Plugging these figures in the above mentioned formula we shall get:
= $ 3.60 / 0.12
= $ 30
So the correct answer is option b i.e. $ 30.
Feel free to ask in case of any query relating to this question
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