Ask Question
BusinessBusiness
7 November, 21:26

E-Eyes just issued some new preferred stock. The issue will pay an annual dividend of $20 in perpetuity, beginning 20 years from now. If the market requires a return of 5.65 percent on this investment, how much does a share of preferred stock cost today

+1
Answers (1)
  1. 8 November, 01:22
    0
    Preferred stock costs $117.92 today

    Explanation:

    Preferred dividend are the fix amount payment which represents the perpetuity, the company can repurchase the preferred share as it is callable.

    The dividends of $20 represent a perpetuity beginning after 20 years. We have to discount all cash flows in the form of dividend for 20 years.

    Perpetuity = Cash flow / Rate of return = $20 / 5.65% = $20 / 0.0565 = 353.98

    Today's price = Perpetuity x (1 + r) - n = $353.98 x (1 + 0.0565) ^-20 = $117.92
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “E-Eyes just issued some new preferred stock. The issue will pay an annual dividend of $20 in perpetuity, beginning 20 years from now. If ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
An unfavorable flexible budget variance for variable expenses would indicate that: Group of answer choices the expenses of the company were less than what they had planned.
Answers (1)
With regard to a futures contract, the long position is held by a. the trader who plans to hold the contract open for the lengthiest time period. b. the trader who commits to delivering the commodity on the delivery date. c.
Answers (1)
A major factor contributing to the slow growth rate of less developed economies is
Answers (1)
The real estate agent told the prospective home buyers, "You seem to really like that last house we looked at, so I better let you know that one of the other agents in our office is scheduled to bring another couple out to take a second look at it
Answers (1)
The Laurel Corporation starts the year with a beginning inventory of 600 units at $5 per unit. The company purchases 1,000 units at $4 each in February and 400 units at $6 each in October. Laurel sells 300 units during the year.
Answers (1)
New Questions in Business
During the Great Depression, consumer spending was higher than ever in history. Question 10 options: True False
Answers (2)
A property is being appraised by the cost approach. The appraiser estimates that the land is worth $17,000 and the replacement cost of the improvements is $235,000. Total depreciation from all causes is $23,000.
Answers (1)
NorthWest Corp. obtained the following information from its accounting records: Sales $70,000 Beginning Finished Goods Inventory $10,000 Ending Finished Goods Inventory $46,000 Cost of Goods Sold $22,000 Ending Work-in-Process Inventory $30,000
Answers (1)
Sally is buying a home and the closing date is set for April 20th. The annual property taxes are $1,234.00 and have not been paid yet. How much will the buyer be credited and the seller be debited?
Answers (1)
Throughout history, big business interests have almost always been at odds with environmentally friendly practices.
Answers (1)
Home » Business » E-Eyes just issued some new preferred stock. The issue will pay an annual dividend of $20 in perpetuity, beginning 20 years from now. If the market requires a return of 5.
Sign Up Forgot Password?