Universal Export's Preferred shares will pay their first dividend in five years. The dividend will be...

Universal Export's Preferred shares will pay their first dividend in five years. The dividend will be 6.5% on a $50-par value. Assume that the dividends will continue annually in perpetuity at that level. The required return of preferred shareholders is 9%. What is the fair price for the preferred shares?

Expert Solution

Fair price = Annual dividend / Required return

Fair price = ($50 * 0.065) / 0.09

Fair price = $36.11

jeff jeffy answered 2 years ago

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Universal Export's Preferred shares will pay their first dividend in five years. The dividend will be...

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