Answer:
The stock should sell at $100
Explanation:
Value of Stock Can be determined by calculating the present value of the future dividend associated with the stock.
As preferred stock receives perpetual dividends we will use the perpetual valuation formula, which is as follow
Value of Stock = Dividend / Required rate of return
Value of Stock = $6.50 / 6.5%
Value of Stock = $100 per share
The stock should sell at $100
Answer:
The stock should sell at $100
Explanation:
According to the given data we have the following:
annual dividend=$6.50 per share
required return=6.5%
In order to calculate at what price should the stock sell we would have to use the following formula:
Dividend return=annual dividend
stock price
0.065=$6.50
stock price
stock price=$6.50
0.065
stock price=$100
The stock should sell at $100
