If a preferred stock dividend rate is 8%, the par value is $100, and the required return for similar risk securities is 7%, what is the value of the stock per share (rounded to the nearest dollar)?

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Quizplus · Accepted Answer

The value of a preferred stock is calculated by dividing the annual dividend by the required rate of return. Here, the annual dividend is 8% of $100, which is $8. The required return is 7%, so the value of the stock is $8 / 0.07 = $114.29, which rounds to $114.

If a Preferred Stock Dividend Rate Is 8%, the Par