Answered: The value of the preferred stock is…

Business

Finance

The value of the preferred stock is $enter your response here per share

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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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

Question

Question content area top

Part 1

(Related to Checkpoint 10.3) (Preferred stock valuation) Calculate the value of a preferred stock that pays a dividend of

$2.50

per share when the market's required yield on similar shares is

percent.

Question content area bottom

Part 1

The value of the preferred stock is

$enter your response here

per share. (Round to the nearest cent.)

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Preferred stock Par value Sale price Flotationcost Annual dividend A $ 100 $ 101 $ 9.00 11% B 40 38 $ 3.50 8% C 35 37 $ 4.00 $ 5.00 D 30 26 5% of par $ 3.00 E 20 20 $ 2.50 9% Stock D Par value $ 30 Sale price $ 26 Flotation cost (% of par) 5% Flotation cost Annual dividend $ 3.00 Proceed from sale Cost of preferred stock By using cell references to the given data calculate the flotation cost of preferred stock D. By using cell references to the given data calculate the proceeds from sale of preferred stock D. By using cell references to the given data calculate the cost of preferred stock D.
Preferred stock Par value Sale price Flotationcost Annual dividend A $ 100 $ 101 $ 9.00 11% B 40 38 $ 3.50 8% C 35 37 $ 4.00 $ 5.00 D 30 26 5% of par $ 3.00 E 20 20 $ 2.50 9% Stock C Par value $ 35 Sale price $ 37 Flotation cost $ 4.00 Annual dividend $ 5.00 Proceed from sale Cost of preferred stock By using cell references to the given data calculate the proceeds from sale of preferred stock C. By using cell references to the given data calucalte the cost of preferred stock C.