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The preferred stock of Denver Savings and Loan pays an annual dividend of $5.10. It has a required rate of return of 6 percent. Compute the price of the preferred stock___________.(Do not round intermediate calculations. Round your answer to 2 decimal places.)

Respuesta :

Answer:

The price of the preferred stock should be $85.

Explanation:

In order to find the price of a preferred stock we will use the formula of finding the price of perpetuity. Because the dividend is fixed and is the same every year we can use the formula

Price = Dividend/Required rate of return

= 5.10/0.06=85.

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