Ah Seng Manufacturing has outstanding preferred stock issue with a par value of $50 per share....
- Ah Seng Manufacturing has outstanding preferred stock issue with a par value of $50 per share. The preferred shares pay dividends annually at a rate of 6%
- What is the annual dividend on Ah Seng preferred stock ?
- If investors require a return of 7% on the stock and the next dividend is payable 1 year from now what is the price of Ah Seng preferred stock?
Homework Answers
Solution-
Par Value of the share =$50
Dividend rate =6% annually
1) So annual dividend on prefered stock= Par value of stock*Dividend rate
=$50*6%=$3 per share
2)if investor required return is 7% on stock then is=
Let closing price of the share at the end of the year is = X Then
(Closing price + Diviend - Opening price)/Opening price=7%
(X+$3-$50)/$50=7%
X=$50.5
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Ah Seng Manufacturing has outstanding preferred stock issue
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