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Lerman Company has preferred stock outstanding. It pays an annual dividend of $20. If its current price is $70, what is the discount rate investors are using to value the stock
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Lerman Company has preferred stock outstanding. It pays an annual dividend of $20. If its current price is $70, what is the discount rate investors are using to value the stock

User Talnicolas
by
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1 Answer

6 votes

Answer:

the discount rate is 28.57%

Step-by-step explanation:

The computation of the discount rate is shown below:

Discount rate = Dividend ÷Share Price of Preferred stock

= $20 ÷ $70

= 28.57%

By dividing the dividend from the price of the preferred stock we can get the discount rate

Hence, the discount rate is 28.57%

User Truman
by
3.7k points
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