Question

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?

Answer 1

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

Answer 2

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.