Asked Dec 10, 2019

Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $2.00 per share. If the required return on this preferred stock is 6.5%, then at what price should the stock sell?


Expert Answer

Step 1

The selling price for the preferred stock can be calculated with the help of below expression:


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Dividend Stock price = Required return

Step 2

Substitute $2 for dividend and 6...


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$2 Stock price = 0.065 = $30.77


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