Answer:
The stock's market value per share is $80.
Explanation:
The preferred stock is just like a perpetuity as it has an indefinite life and pays a constant dividend/ cash flow through out. The formula for the value or current price of a perpetuity is,
V or P0 = Cash flow or Dividend / required rate of return
In this case, the dividend per share is paid at 8% of par value. Thus, dividend per share is 100 * 0.08 = $8 per share.
The required rate of return is 10%.
The current price or market value of this stock is,
V or P0 = 8 / 0.1 = $80
Answer:
c) The seller's share of $2,525.76
Explanation:
The computation is shown below:
= Due amount × given number of days ÷ total number of days in a year
where,
Due amount is $3,200
Given number of days is calculated from Jan 1 to October 15 i.e
= 31 days in January + 28 days in February + 31 days in March + 30 days in April + 31 days in May + 30 days in June + 31 days in July + 31 days in August + 30 days in September + 15 days in October
= 288 days
So, the amount is
= $3,200 × 288 days ÷ 365 days
= 2,524.93
i.e 2,525.76
First, we calculate the present value in year 5 of the annuity and then once again calculate the present value of this result to get the value today
Present value an annuity = P*(1-(1+r)^-n)/r
where P = 3200, r = 0.10 and n = 15 payments (from year 6 to year 20)
Present value of the annuity in year 5 = 3200*(1-(1+0.10)^-15/)0.10
Present value of the annuity in year 5 = 3200*(1-1.10^-15)/0.10
Present value of the annuity in year 5 = 24,339.45
Now with 24,339.45 as the FV , we calculate the present value today as
PV today = FV/(1+r)^n = 24339.45/1.10^5
PV today =15,112.89
Value today =$15,112.89
The purchase price of an asset plus the costs of operation.
Source: Investopedia