Caspian Sea is considering raising $33.00 million by issuing preferred stock. They believe the market will use a discount rate of 11.87% to value the preferred stock which will pay a dividend of $3.23. How many shares will they need to issue

1,212,723 shares

Explanation:

Given that,

Value of issuing preferred stock = $33,000,000

Discount rate = 11.87%

Dividend paid = $3.23

Price of preferred stock:

= Annual dividend : discount rate

= $3.23 : 0.1187

= $27.2115

Shares will they need to issue:

= Value of issuing preferred stock : Price of preferred stock

= $33,000,000 : $27.2115

= 1,212,723