Question

SEU Co. has preferred stock outstanding that is expected to pay an annual dividend of $4.88 every year in perpetuity. If the required return is 4.69 percent, what is the current stock price

Answer 1

Current stock price = $1.040

Step-by-step explanation:

We know,

Current preferred stock price = Preferred dividend ÷ Expected rate of return

Given,

Expected rate of return = 4.69%

Preferred dividend = $4.88

Current preferred stock price = ?

Putting the values into the formula, we can get

Current preferred stock price = $4.88 ÷ 4.69%

Or,Current preferred stock price = $1.040.

Therefore, the current preferred stock price is $1.040.