Question

Find the value of a share of preferred stock that pays $6 per year given a return of 16%?

Answer 1

The value of a share of preferred stock with a $6 annual dividend and a 16% required return is $37.50.

Step-by-step explanation:

To find the value of a share of preferred stock that pays $6 per year with a required return of 16%, you would use the preferred stock valuation formula:

Value of preferred stock = Dividend per share / Required return

In this case, the calculation would be as follows:

Value of preferred stock = $6 / 0.16 = $37.50

Therefore, the value of the preferred stock is $37.50 per share.