A corporation pays an annual dividend of 10% on its preferred stock whose face value is...
A corporation pays an annual dividend of 10% on its preferred stock whose face value is $50. If similar companies pay a return of 15%, how much is a share of the corporation's preferred stock worth?
Homework Answers
Calculation of price of preferred stock:
Dividend= 50*0.10= 5
Required return= 15%
Current price= dividend/required return
Current price= 5/0.15= 33.33
Price of preferred stock is 33.33
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