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28 December, 01:04

SEU Co. has preferred stock outstanding that is expected to pay an annual dividend of $4.88 every year in perpetuity. If the required return is 4.69 percent, what is the current stock price

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  1. 28 December, 02:19
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    Current stock price = $1.040

    Explanation:

    We know,

    Current preferred stock price = Preferred dividend : Expected rate of return

    Given,

    Expected rate of return = 4.69%

    Preferred dividend = $4.88

    Current preferred stock price = ?

    Putting the values into the formula, we can get

    Current preferred stock price = $4.88 : 4.69%

    Or, Current preferred stock price = $1.040.

    Therefore, the current preferred stock price is $1.040.
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