Richardson Enterprises, Inc. offers $120 par-value preferred stock that pays a 11% annual dividend. How much...

Richardson Enterprises, Inc. offers $120 par-value preferred stock that pays a 11% annual dividend. How much are you willing to pay for one share of this stock if you want to earn 12.8 percent on an equity investment of this level of risk?

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Expert Solution

Annual dividend=120*11%=$13.2

Hence price of stock=Annual dividend/Required return

=13.2/0.128

which is equal to

=$103.125

jeff jeffy answered 2 years ago

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