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OLga [1]
3 years ago
8

What is the value of a preferred stock where the dividend rate is 14% on a $100 par value? Assume the discount rate for this sto

ck is 12%?
Business
1 answer:
Ulleksa [173]3 years ago
8 0

Answer:

Value of preferred stock will be $140

Explanation:

We have given par value of preferred stock = $100

Dividend rate = 14 %

Discount rate on preferred stock = 12%

Preferred stock dividend =face\ value\times dividend\ rate=100\times 0.14=14

We have to find the value of preferred stock

Value of preferred stock =\frac{preferred\ stock\ dividend}{discount\ rate}=\frac{14}{0.1}=140

So value of preferred stock will be $140

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They are the one with high efficiency with strict control and command .

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mixas84 [53]

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Required rate of return may also change on account of change in the firm's risk. If the firm assumes more risk, such risk would deter investors from investing in such bonds and in such scenario, the firm has to offer higher coupon rate than the rate prevailing in the market to attract the investors.

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