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VLD [36.1K]
3 years ago
12

8-12 Value of a Preferred Stock A preferred stock from Hecla Mining Co. (HLPRB) pays $3.50 in annual dividends. If the required

return on the preferred stock is 6.8 percent, what is the value of the stock
Business
1 answer:
Sphinxa [80]3 years ago
4 0

Answer:

Value of stock is $51.47

Explanation:

As the preferred dividend is paid by the constant amount or by predetermined rate there is no growth in this case. The price of preferred share is calculated by using perpetuity method.

Price of the stock = Dividend / rate of return

Price of the stock = $3.5 / 6.8%

Price of the stock = $3.5 / 0.068

Price of the stock = $51.47

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"A firm finances itself with 30 percent debt, 60 percent common equity, and 10 percent preferred stock. The before-tax cost of d
Nutka1998 [239]

Answer:

WACC = Ke(E/V) + Kd(D/V)(1-T)  + Kp(P/V)

WACC = 15(60/100) + 5(30/100)(1-0.3) + 10(10/100)

WACC = 9 + 1.05 + 1

WACC = 11.05%

Explanation:

Weighted average cost of capital is a function of cost of common stock and the proportion of common stock in the capital structure plus after-tax cost of debt and proportion of debt in the capital structure plus cost of preferred stock and the proportion of preferred stock in the capital structure.  Ke = Cost of equity or common stock, kd = cost of debt and kp = cost of preferred stock.

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3 years ago
Danny is an associate with Valley Chartered Accounts in New York. Among various other work commitments, Danny has to file the ta
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Answer:

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3 years ago
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