Millco Victoria has preferred shares outstanding and pays a semi-annual dividend of $4.50. If the next...

Millco Victoria has preferred shares outstanding and pays a semi-annual dividend of $4.50. If the next dividend is paid six months from now and the annual required return is 12%, how much would you pay today if you want to buy a preferred share from this company?

Select one:

a. $50.00

b. $25.00

c. $75.00

d. $66.25

Solutions

Expert Solution

The amount payable to buy a preferred share is the present value of its perpetual annual dividends:

=Annual dividend/required return

=(4.5*2)/12%

=75

The answer is c)

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Big Oil, Inc. has a preferred stock outstanding that pays a $7 annual dividend. If investors’...

Big Oil, Inc. has a preferred stock outstanding that pays a $7 annual dividend. If investors’ required rate of return is 10 percent, what is the market value of the shares? Round your answer to the nearest cent. $ If the required return declines to 7 percent, what is the change in the price of the stock? Round your answer to the nearest cent. The price -Select- by $ .

A firm has a perpetual preffered stock that pays semi-annual dividends of $4.50. Its current price...

A firm has a perpetual preffered stock that pays semi-annual dividends of $4.50. Its current price is $73.00. What is the rate of return and the effective annual rate? A.) r=12.33 EAR=12.07 B.) r=11.59 EAR=12.71 C.) r=13.22 EAR=12.72 D.) r=12.33 EAR=12.71 E.) r=12.33 EAR=13.22

There are 3,500 preferred shares outstanding of McDonalds stock with an annual dividend of $2 per share.

There are 3,500 preferred shares outstanding of McDonalds stock with an annual dividend of $2 per share. If McDonalds has not paid a preferred dividend in 6 quarters, how much does it need to pay to preferred shareholders in total before it is able to pay any common dividends? $10,500 $11,200 $14,800 $8,000

Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every...

Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every year, in perpetuity. This issue currently sells for $95 per share. What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every...

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.60 dividend every year, in perpetuity. If this issue currently sells for $80.40 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Required return %

Cardi B, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every...

Cardi B, Inc., has an issue of preferred stock outstanding that pays a $3.15 dividend every year in perpetuity. If this issue currently sells for $72 per share, what is the required return?

Cullumber Hand Trucks has a preferred share issue outstanding that pays a dividend of $1.30 per...

Cullumber Hand Trucks has a preferred share issue outstanding that pays a dividend of $1.30 per year. The current cost of preferred equity for Cullumber is 7.40 percent. Cullumber issues additional preferred shares that pay exactly the same dividend and the investment banker retains 5.10 percent of the sale price. What is the current price of preferred shares? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.) Current price of preferred...

e. Booker Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal...

e. Booker Temps has an issue of preferred stock outstanding that pays stockholders a dividend equal to $10 each year. If the appropriate required rate of return for this stock is 8%, what is its market value? D = $10 and rs = 8%. Thus, P0 = $10/0.08 = $12.50. Assume that Booker Temps is a constant growth company whose last dividend (D0, which was paid yesterday) was $2 and whose dividend is expected to grow indefinitely at a 6%...

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

A preferred stock with a $25 par value pays an annual dividend of 8% and is...

A preferred stock with a $25 par value pays an annual dividend of 8% and is currently trading for $18 per share. What is the annualized return being demanded by investors? AT&T stock (T) just paid an annual dividend of $1.75 for the most recent year. The current stock price is $38. Assuming investors expect a constant growth rate in dividends of 6% into perpetuity, what is the implied required return being demanded by investors?

Subjects