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Timeless Corporation issued preferred stock with a par value of $600. The stock promised to pay an annual dividend equal to 20.0% of the par value. If the appropriate discount rate for this stock is 13.
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Timeless Corporation issued preferred stock with a par value of $600. The stock promised to pay an annual dividend equal to 20.0% of the par value. If the appropriate discount rate for this stock is 13.0%, what is the value of the stock

User Lux
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1 Answer

3 votes

Answer:

$923.08

Step-by-step explanation:

Calculation to determine the value of stock

Annual Dividend = 20%*600 = D = 120

Discount rate = r = 13% = 0.13

Value of the preferred stock can be calculated using the perpetuity formula:

Value of the dividend = P = D/r = 120/0.13 = $923.08

Therefore the value of stock is $923.08

User Chelder
by
4.2k points
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