You are considering the purchase of XYZ Company's perpetual preferred stock which pays a perpetual annual dividend of $8 per share.If the appropriate discount rate for this investment is 14%,what is the price of one share of this stock?

Question

Quizplus · Accepted Answer

The price of perpetual preferred stock can be calculated using the formula: price = annual dividend/discount rate. Therefore, the price of one share of this stock is $57.14 ($8/0.14). Option D cannot be determined without knowing the maturity date, which is irrelevant for perpetual preferred stock. Options A and C are not correct calculations based on the formula.

You Are Considering the Purchase of XYZ Company's Perpetual Preferred