Company has preferred stock that promises its holders a fixed annual dividend of $8. Assuming a...

Question

Question

Company has preferred stock that promises its holders a fixed annual dividend of $8. Assuming a required return of 12.8% for the preferred stock based on the risk profile of the company, what is the value of the preferred stock?

Answer 1

Answer #1

Answer:

Fixed annual dividend = $8

Required rate of return = 12.8%

Price = dividend/required rate = 8 / 12.8% = 62.5

Hence value of the preferred stock is $62.5

Add a comment

Answer 2

Similar Homework Help Questions

The preferred stock of XYZ Corp. pays a fixed annual dividend of $6. It has a...

The preferred stock of XYZ Corp. pays a fixed annual dividend of $6. It has a required rate of return of 12 percent. Compute the price of the preferred stock.
Dick's Co Pays an annual dividend of $6 to its preferred stock. The rate of return...

Dick's Co Pays an annual dividend of $6 to its preferred stock. The rate of return on T-Bill is 3% and the market risk premium is 8%. What is the intrinsic value of the preferred stock if the beta of the preferred stock is 1.257 Mountain Development Corporation is expected to pay a dividend of $3.00 in the upcoming year. Predicted to grow at the rate of 8% per year. The firms market capitalization rate is 14%. Using the constant...
Achi Corp, has preferred stock with an annual dividend of $3.19

Achi Corp, has preferred stock with an annual dividend of $3.19. If the required return on Achi's preferred stock is 8.4%, what is its price? (Hint: For a preferred stock. the dividend growth rate is zero.) Achi's stock price will be $ _______ (Round to the nearest cent.)

Achi Corp. has preferred stock with an annual dividend of $3.22

Achi Corp. has preferred stock with an annual dividend of $3.22. If the required return on Achi's preferred stock is 7.7%, what is its price? (Hint: For a preferred stock, the dividend growth rate is zero.) Achi's stock price will be $ _______ . (Round to the nearest cent.)
ZZZ-Best, Inc. recently issued $65 par value preferred stock that pays an annual dividend of $17....

ZZZ-Best, Inc. recently issued $65 par value preferred stock that pays an annual dividend of $17. If the stock is currently selling for $76, what is the expected return of this preferred stock? 22.37% 22.94% 0 24.42% O 20.27% O 22.60% Your broker has recommended that you purchase stock in National Bank & Trust, Inc. National Bank & Trust recently paid its annual dividend of $5. Dividends have consistently grown at a rate of 3.1%. Based on your analysis, you...
Intro Four Seasons has preferred stock outstanding that promises to pay a quarterly dividend of $0.92...

Intro Four Seasons has preferred stock outstanding that promises to pay a quarterly dividend of $0.92 every quarter forever. The stock currently trades for $27.5. Part 1 What is the annual cost of preferred stock?

Lehman & Company has an annual dividend of $14. The stock has a beta of 1.36,...

Lehman & Company has an annual dividend of $14. The stock has a beta of 1.36, the risk-free rate is 2.4% and the market return is 9.9%. Assuming that CAPM holds, what is the intrinsic value of this stock?
Marston Manufacturing Company pays an annual dividend rate of 10.00% on its preferred stock that currently...

Marston Manufacturing Company pays an annual dividend rate of 10.00% on its preferred stock that currently returns 13.40% and has a par value of $100.00 per share. What is the value of Marston's preferred stock? Round to the nearest whole dollar.
The Weatherfield Way Construction Company has common and preferred stock outstanding. The preferred stock pays an annual...

The Weatherfield Way Construction Company has common and preferred stock outstanding. The preferred stock pays an annual dividend of $7.50 per share, and the required rate of return for similar preferred stocks is 11%. The common stock paid a dividend of $3.00 per share last year, but the company expected that earnings and dividends will grow by 25% for the next two years before dropping to a constant 9% growth rate afterward. The required rate of return on similar common stocks is 13%...

A company has issued preferred stock with an annual dividend of $3.08 that will be paid...

A company has issued preferred stock with an annual dividend of $3.08 that will be paid in perpetuity. The current price of the stock is $42.15. What is the expected rate of return on the preferred stock? Enter your answer as a percentage. Do not include the percentage sign in your answer. Enter your response below rounded to 2 DECIMAL PLACES.