The growth rate for the firm's common stock is 7%. The firm's preferred stock is paying an annual dividend of $3. What is the preferred stock price if the required rate of return is 8%?

Question

Quizplus · Accepted Answer

We can use the formula for the price of a preferred stock:

Preferred stock price = Annual dividend / Required rate of return

Preferred stock price = $3 / 0.08

Preferred stock price = $37.50

Therefore, the correct answer is B.

The Growth Rate for the Firm's Common Stock Is 7