Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of...

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of its $100 par value. Preferred stock of this type currently yields 9%. Assume dividends are paid annually.

What is the estimated value of Rolen's preferred stock? Round your answer to the nearest cent.
$_______________
Suppose interest rate levels have risen to the point where the preferred stock now yields 12%. What would be the new estimated value of Rolen's preferred stock? Round your answer to the nearest cent.
$_______________

Expert Solution

Value of Preferred Stock = Annual Dividend/Required rate of return

= 100*12%/9%

= $133.33 per share

b.New value = 12/12%

= $100.00

jeff jeffy answered 2 years ago

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