A preferred stock investment will pay you an annual $9 dividend on the same day each...
A preferred stock investment will pay you an annual $9 dividend on the same day each year. The dividends will begin 12 years from today and go on forever. How much is this investment worth today if the required rate is 10%?
A. $27.77
B. $28.68
C. $30.19
D. $31.54
E. $32.48
Homework Answers
Calculate the price of the share as follows:
Price = (Dividend/Required rate)
Price = $9/10%
Price = $90
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Calculate the present worth of the dividend as follows:
Present worth = Price/(1+required rate)^12
Present worth = $90/ (1+10%)^12
Present worth = $28.68
Answer: Option B
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