A company's preferred shares pay a $2.25 dividend every three months in perpetuity. What is the...
A company's preferred shares pay a $2.25 dividend every three months in perpetuity. What is the fair market value of the shares just after payment of a dividend if the rate of return required by the market on shares of similar risk is 1% compounded quarterly? (Round your answer to the nearest cent.)
Homework Answers
Share price = Dividend Payment per period / Interest rate per period
= 2.25 / 1%
= 2.25 / 0.01
= 225
So, The share price of the preference is $225
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