Question

Lindor​ inc.'s $100 par value preferred stock pays a dividend fixed at​ 8% of par. to earn​ 12% on an investment in this​ stock, you need to purchase the shares at a per share price of

Answer 1

Answer: $66.67

Explanation:

Lindor​ inc.'s $100 par value preferred stock pays a dividend fixed at​ 8% of par. to earn​ 12% on an investment in this​ stock, you need to purchase the shares at a per share price of ;

Given the following :

Par value of preferred stock = $100

Fixed Dividend rate = 8% of par

Expected return on investment (r) = 12%

Purchase price of this stock in other to earn 12% :

Per share price is given by:

(par value × Dividend rate) / expected return

($100 * 0.08) / 0.12

$8 / 0.12 = $66.6666

= $66.67