Question

International Imports (I2) pays an annual dividend rate of 10.40% on its preferred stock that currently returns 13.94% and has a par value of $100.00 per share. What is the value of I2’s preferred stock?

Answer 1

Answer:

$74.61

Explanation:

The computation of the value of preferred stock is shown below:

Value of preferred stock = Annual dividend ÷ return of preferred stock per share

= 10.40% × 100  ÷ 13.94%

= $74.61

Simply we divide the annual dividend by the value of preferred stock per share so that the correct value of preferred stock can be computed