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A preferred stock pays a 3% dividend yield on a redemption value of $40, what is its value using a cost of equity of 2.5%? What is the value if the cost of equity goes up 100 basis points? 9.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 21MC

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Question

A preferred stock pays a 3% dividend yield on a
redemption value of $40, what is its value using a cost of
equity of 2.5%? What is the value if the cost of equity
goes up 100 basis points?
9.

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