Question

The price of a preferred share of stock that pays a $3.00 dividend, has an expected return of 12%, and a tax rate= 30% is_____.a. $7.00b. $13.00c. $20.00d.$10.00

Answer 1

$25

Step-by-step explanation:

The computation of the price of the preferred stock is shown below:

Price of the preferred stock = Annual dividend ÷ expected rate of return

= $3 ÷ 12%

= $25 per share

Simply we divide the annual dividend by the expected rate of return so that the correct price of preferred stock can be computed

All other information which is given is not relevant. Hence, ignored it

This is the answer and the same is not provided in the given options