Determine the value of a share of DuPont Series A $4.50 cumulative preferred sto

Question

Determine the value of a share of DuPont Series A $4.50 cumulative preferred stock, no par, to an investor who requires a 9 percent rate of return on this security. The issue is callable at $120 per share plus accrued dividends.  However, the issue is not expected to be called at any time in the foreseeable future.Determine the value of a share of DuPont Series A $4.50 cumulative preferred stock, no par, to an investor who requires a 9 percent rate of return on this security. The issue is callable at $120 per share plus accrued dividends.  However, the issue is not expected to be called at any time in the foreseeable future.

Explanation / Answer

P0 = Dp/kp Dp = $4.50; kp = 0.09 P0 = $4.50/0.09 = $50

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