A company's preferred shares pay a $4.25 dividend every three months in perpetuity. What is the...
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A company's preferred shares pay a $4.25 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 2% compounded quarterly? (Round your answer to the nearest cent.) |
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| Fair market value $ per share. | |
Homework Answers
Fair market value of the share can be calculated using the following formula-
(Dividend which has been paid to the preference Shareholders for year/rate of return)
=(4.25*4)/(1.02)^4-1
=17/8.243216%
= 206.23
Market value of the preference share would be 206.23
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