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yanalaym [24]
3 years ago
11

What is the value of a preferred stock that pays a perpetual dividend of $150 at the end of each year when the interest rate is

7 percent
Business
1 answer:
padilas [110]3 years ago
8 0

Answer:

$2,143

Explanation:

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

Value of the preferred stock = Cash flows with respect to perpetual dividend ÷ the rate of interest

= $150 ÷ 0.07

= $2,143

Simply we divided the rate of the interest by the cash flows so that the accurate value of the preferred stock can be computed

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