The Hold Up Bank has issued 35,000,000 shares of preferred stock. Each share pays a $4.00 quarterly dividend in perpetuity. If the next dividend is to be paid later today, and one preferred share currently costs $204.00, what is the cost of preferred equity? Calculate as an EAR, not an APR. Enter your answer as a percent rounded to two decimals. Hint The stock price is simply the present value of the expected future cash flows. Here the cash flows (dividends) happen to be a constant perpetuity with the first payment taking place today. %
The Hold Up Bank has issued 35,000,000 shares of preferred stock. Each share pays a $4.00 quarterly dividend in perpetuity. If the next dividend is to be paid later today, and one preferred share currently costs $204.00, what is the cost of preferred equity? Calculate as an EAR, not an APR. Enter your answer as a percent rounded to two decimals. Hint The stock price is simply the present value of the expected future cash flows. Here the cash flows (dividends) happen to be a constant perpetuity with the first payment taking place today. %
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:The Hold Up Bank has issued 35,000,000 shares of preferred stock. Each share pays a $4.00 quarterly
dividend in perpetulty. If the next dividend is to be paid later today, and one preferred share currently costs
$204.00, what is the cost of preferred equity? Calculate as an EAR, not an APR. Enter your answer as a
percent rounded to two decimals. Hint. The stock price is simply the present value of the expected future
cash flows. Here the cash flows (dividends) happen to be a constant perpetuity with the first payment taking
place today.
%
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