Casino Games Company preferred stock pays a perpetual annual dividend of 3.5% of its $100 par value.If investors' required rate of return on this stock is 11%,what is the value per share?

Question

Quizplus · Accepted Answer

To find the value per share, we need to use the formula:

Value per share = Annual dividend / Required rate of return

Annual dividend = 3.5% x $100 = $3.50
Required rate of return = 11%

Value per share = $3.50 / 11% = $31.82 (rounded to two decimal places)

Therefore, the best choice is B.

Casino Games Company Preferred Stock Pays a Perpetual Annual Dividend