Question

Cartwright Brothers preferred stock has an annual dividend of $3.50 per share if the required rate of return on the preferred stock is 12% how much would you be willing to pay for one share of the preferred stock

Answer 1

Answer:

$29.17

Explanation:

Calculation for how much would you be willing to pay for one share of the preferred stock

Using this formula

Amount willing to pay=Preferred stock annual dividend/Required rate of return on preferred stock

Let plug in the formula

Amount willing to pay=$3.50 per share/0.12

Amount willing to pay=$29.166

Amount willing to pay=$29.17 (Approximately)

Therefore how much would you be willing to pay for one share of the preferred stock is $29.17