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RE Utilities preferred stock has an annual dividend payment of $8, a stated (par) value of $100, and an effective maturity of 30 years. If similar preferred stock issues have market yields of 7 percent, what is the value of the preferred stock

Respuesta :

The value of the preferred stock is $112.41 if the company issues a similar preferred stock with a 7% market yield then the value is $112.41.

What is Dividend?

The dividend is a distribution of profit when a corporation earns a surplus then that is divided among the shareholders in the proportion of they have held share incorporation.

Given Information:

Dividend=$8

Par Value=$100

Market Yield=7%

Time Period=30 Years

Calculation of Value of Preferred stock

Dividend=$8

Time =30 years

market yield=7%

par value =100

preferred stock price=Fixed Dividend payment divided by market yield or required rate of return

Thus, after calculating the from above information we get the value of the preferred stock which is $112.41

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