Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually. What is the estimated value of Macro’s preferred stock?
Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually. What is the estimated value of Macro’s preferred stock?
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 14P
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Several years ago, Macro Riders issued preferred stock with a stated annual dividend of 5% of its $600 par value. Preferred stock of this type currently yields 10%. Assume dividends are paid annually.
- What is the estimated value of Macro’s preferred stock?
- Suppose interest rate levels have risen to the point where the preferred stock now yields 14%. What would be the new estimated value of Macro’s preferred stock?
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