This Question: 1 pt 10 o 10 (ocomplete) This Quiz: 10 pts possce wishes to estma

Question

This Question: 1 pt 10 o 10 (ocomplete) This Quiz: 10 pts possce wishes to estmate the value of its outstanding prefemed stock. The preterred iesue has a par value of $90 and pays an annual dvidend of 6.40 per share Smilar s preferred stocks are annual rate of 'eten oo7% a. What is the market value of the oudstanding preterred stock? If an inveshor purchased the prelemed stock at the value calculated in part a how much does the gain or lose per share &she; sels the stock when the required retum on smlar risk pretered stocks has noen to 112 a. The market value of the outstanding prefered stock is per share (Round to the nearest cent) b.lfthe roarednehm on sintavisk preferred stocks has nsen to 1,2%, the value oftho teck wil bet[1 share 0ound to the nearest cent ) "annvestr prchased te preferred stock at the vaue calculated n pat a and set, the stock when the reened retrn on smerna penned iteks has neen to 112% ne gan afpr ihee?iRant tie nerer eitt- humber for a gain and a negative number for a loss) Enter your anser in each of the anser boxes

Explanation / Answer

Ans) a) The market value of the outstanding preferred stock = D1 / K

= $6.4/9.7%

=$65.97

b) The value of preference share will be = $6.4/11.2%

= $57.14

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