Answered: Calculate the value of a preferred…

Calculate the value of a preferred stock that pays a dividend of $6 per share if your required rate of return is 12 percent.

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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Question

Value of preferred stock

Calculate the value of a preferred stock that
pays a dividend of $6 per share if your
required rate of return is 12 percent.

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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