The Hold Up Bank has issued 40,000,000 shares of preferred stock. Each share pays a $2.00 quarterly dividend in perpetuity. If the next dividend is to be paid later today, and one preferred share currently costs $135.33, 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. 5.92A %
The Hold Up Bank has issued 40,000,000 shares of preferred stock. Each share pays a $2.00 quarterly dividend in perpetuity. If the next dividend is to be paid later today, and one preferred share currently costs $135.33, 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. 5.92A %
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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