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An issue of preferred stock is paying an annual dividend of $5. What.pdf

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An issue of preferred stock is paying an annual dividend of $5. What is the preferred stock price if the required rate of return is 11%? Solution part a: common stock growth, 14% here is irrelevant cost of preferred stock (Kp)= 11% pref. dividend (Pd) = $5 Market price of pref. stock= Pd/Kp =$5/0.11 =$45.45 part b: dividend= $3.75 growth (g)= .08 RRR(Ke) = .16 Price of share = div(1+g)/ke-g =$3.75*1.08/.16-.08 = $50.625.

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An issue of preferred stock is paying an annual dividend of $5. What is the preferred stock price if the required rate of return is 11%? Solution part a: common stock growth, 14% here is irrelevant cost of preferred stock (Kp)= 11% pref. dividend (Pd) = $5 Market price of pref. stock= Pd/Kp =$5/0.11 =$45.45 part b: dividend= $3.75 growth (g)= .08 RRR(Ke) = .16 Price of share = div(1+g)/ke-g =$3.75*1.08/.16-.08 = $50.625

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An issue of preferred stock is paying an annual dividend of $5. What.pdf

  • 1. An issue of preferred stock is paying an annual dividend of $5. What is the preferred stock price if the required rate of return is 11%? Solution part a: common stock growth, 14% here is irrelevant cost of preferred stock (Kp)= 11% pref. dividend (Pd) = $5 Market price of pref. stock= Pd/Kp =$5/0.11 =$45.45 part b: dividend= $3.75 growth (g)= .08 RRR(Ke) = .16 Price of share = div(1+g)/ke-g =$3.75*1.08/.16-.08 = $50.625