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SUNSTORE Companies that have preferred stock outstanding promise to pay a stated dividend for an infinite period. Preferred s
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Answer #1

Calculation of value of preferred stock:.

Dividend= 100*0.11= $11

Value= dividend/required return= 11/0.1474= 74.63

Value of preferred stock is $74.63

Calculation of value of preferred stock when yield is 8.84%

Value= 11/0.084= 130.95

The value of stock will increase. So correct answer is increase

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