Foundations Of Financial Management
Foundations Of Financial Management
17th Edition
ISBN: 9781260013917
Author: BLOCK, Stanley B., HIRT, Geoffrey A., Danielsen, Bartley R.
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 25P

For the next two problems, assume interest payments are on a semiannual basis.

X-Tech Company issued preferred stock many years ago. It carries a fixed dividend of $ 12.00 per share. With the passage of time, yields have soared from the original 10 percent to 17 percent (yield is the same as required rate of return).

a. What was the original issue price?

b. What is the current value of this preferred stock?

c. If the yield on the Standard & Poor’s Preferred Stock Index declines, how will the price of the preferred stock be affected?

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