Final answer:
The value of the preferred stock based on the provided annual dividend and opportunity cost is calculated using the dividend discount model, resulting in a value of $29.33.
Step-by-step explanation:
The subject of the question appears to focus on calculating the value of a preferred stock given its annual dividend and investors' opportunity cost. The calculation required is based on the dividend discount model (DDM), which values a stock based on its expected future dividends. To find the value of a preferred stock, we typically divide the annual dividend by the investor's required rate of return (opportunity cost). Given an annual dividend of $2.20 and an opportunity cost of 7.5%, the value of the preferred stock would be calculated as follows: $2.20 / 0.075, resulting in a value of $29.33. Thus, the answer is 1) $29.33.
The most recent annual dividend on a preferred share was $2.20. The opportunity cost of investors holding this stock is 7.5%. To calculate the value of the share, we can use the formula for present value of dividends:
Value = Dividend / Opportunity Cost
Value = $2.20 / 0.075
Value = $29.33
Therefore, the value of the preferred share is $29.33.