7 3 10 1 2 P10 17 Modified see problem below Valuing perffered stock a What is the value of a preferred stock where the dividend

Question

7 3 10 1 2 P10 17 Modified see problem below Valuing perffered stock a What is the value of a preferred stock where the dividend rate is 6 0 percent on a 50 par value and the market s required yield on similar shares is 7 0 percent b Should you acquire the stock if the current market price is 45 00 share c If you purchase the stock for the value 45 share what is your expected rate of return Hint use the formula Expected rate of return Dividend dollars on preferred stock the price of a share of preferred stock Preferred Stock Valuation and Expected Rate of Return Par value Current market price Dividend rate Dividend dollars Required Rate of Return A Value Hint See section 10 3 B C Expected rate of return 201 50 6 0 3 00 calc 7 0 42 86 see page 317 equation 10 6 6 67 F

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