Ask Experts Questions for FREE Help !
Ask
    huskyhottie's Avatar
    huskyhottie Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Jan 23, 2007, 12:14 AM
    Valuation of preferred stock
    Bob’s Bank just issued some new preferred stock. The issue will pay a $7.00 annual dividend in perpetuity, beginning four years from now. If the market requires a 6 percent return on this investment, how much does a share of preferred stock cost today?
    bunnyKutty's Avatar
    bunnyKutty Posts: 60, Reputation: 5
    Junior Member
    		  
    #2

    Sep 25, 2009, 09:17 PM

    rate of return on preferred stock = preferred dividend/ Current market price of preferred stock

    6% = 7.00/ price of preferred stock

    Price of preferred stock = 7.00/ 6%

    = $116.67
    morgaine300's Avatar
    morgaine300 Posts: 6,561, Reputation: 276
    Uber Member
    		  
    #3

    Sep 26, 2009, 05:06 PM

    You might want to check out the new threads instead of the 2-year old ones.
Not your question? Ask your question View similar questions
 

Question Tools Search this Question
Search this Question:

Advanced Search

Add your answer here.


Check out some similar questions!

Stock Split and Stock Dividend [ 3 Answers ]

The common stock of Alexander Hamilton Inc. is currently selling at $120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $70 per share. Nine million shares are issued and outstanding. Prepare...

Stock provision and over valuation of stock [ 4 Answers ]

can anyone send me double entry for stock provision ? Provision amount is 200,000. further stock is over valued by 100,000 what will be the accounting entry for over valuation of stock. Early response will be of immmmmense help for me:o

Valuation of stock [ 1 Answers ]

Mary Smith commenced trading on 1 September 20x9 as adistributor of the straight cut garden lawn mower, a relatively new product which is now becoming increasingly popular. Upon commencing trading, mary transferred $7,000 from her personal savings to open a business bank account. Mary purchases...

Need help with common and preferred stock [ 0 Answers ]

Common and preferred stock—issuances and dividends. Flameco Corp. was incorporated on January 1, 2003, and issued the following stock, for cash: 1 1,250,000 shares of $9 par per share common stock were authorized; 550,000 shares were issued on January 1,...

View more questions Search