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Carby Hardware has an outstanding issue of perpetual preferred stock with an annual dividend of $8.40...

Carby Hardware has an outstanding issue of perpetual preferred stock with an annual dividend of $8.40 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell?

Select the correct answer.

a. $131.30
b. $129.92
c. $130.61
d. $129.23
e. $128.54

Solutions

Expert Solution

Given about Carby Hardware,

Annual dividend = $8.40

required return on this stock = 6.5%

So, stock price can be calculated using perpetuity formula

PV = Annual dividend/required return = 8.4/0.065 = $129.23

Option d is correct.

jeff jeffy answered 2 years ago
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