Riza Corporation's preferred stock has a par value of $100 and a dividend rate of 6%. If the required return on the stock is 8%, its intrinsic value is closest to:
A) $75.
B) $94.
C) $133.
D) $300.

Question

Quizplus · Accepted Answer

The intrinsic value of preferred stock is calculated by dividing the annual dividend by the required return. The annual dividend is 6% of $100, which is $6. The intrinsic value is $6 / 0.08 = $75.

Riza Corporation's Preferred Stock Has a Par Value of $100