Department 65 has an issue of preferred stock that pays a dividend of $4.00.The preferred stockholders require a rate of return on this stock of 9%.At what price should the preferred stock sell for? Round off to the nearest $0.10.

Question

Quizplus · Accepted Answer

To calculate the price of the preferred stock, we can use the formula:
Price of preferred stock = Dividend / Required rate of return
Plugging in the given values, we get:
Price of preferred stock = $4.00 / 0.09
Price of preferred stock = $44.44 (rounded off to the nearest $0.10)
Therefore, the preferred stock should sell for $44.40, which is option B.

Department 65 Has an Issue of Preferred Stock That Pays