(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is...

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(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is...

(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 13 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 14 percent.

The value of the preferred stock is $ . (Round to the nearest cent.)

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Answer 1

Answer #1

Annual dividend = $100 * 13% = $13

Return = 14% or 0.14

Value of preferred stock = Dividend / Return = $13 / 0.14 = $92.86

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Answer 2

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