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gulaghasi [49]
3 years ago
8

A preferred stock from Hecla Mining Co. (HLPRB) pays $3.10 in annual dividends. If the required rate of return on the preferred

stock is 7.4 percent, what is the fair present value of the stock?
Business
2 answers:
maks197457 [2]3 years ago
5 0

Answer:

present value of stock = $41.89

Explanation:

given data

annual dividends = $3.10

rate of return = 7.4 percent

solution

we get here fair present value of stock that is express as

present value of stock = Annual dividends ÷ Required return  ....................1

put here value and we get

present value of stock = \frac{3.10}{0.074}  

solve it and we get

present value of stock = $41.89

Varvara68 [4.7K]3 years ago
3 0

Answer:

$41.89

Explanation:

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

Fair Value of the stock = (Annual dividends) ÷ (Required rate of return - growth rate)

                                      = $3.10 ÷ 7.4%

                                      = $41.89

In order to compute the fair present value of the stock, we simply divided the annual dividend by the required rate of return so that the approximate value could come.

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