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Homework answers / question archive / The value of a preferred share that pays a dividend of 10% and par value is $ 80
The value of a preferred share that pays a dividend of 10% and par value is $ 80.00, for an investor who wants an 8% return is $ 100.00?
Value of preferred share = (dividend per share/ required rate of return on preferred stock)
Where,
Dividend per share = 10% of par value
= 10% * $80 = $8 per share
The required rate of return on preferred share = 8%
Therefore,
Current value of Preferred share = $8 / 8%
=$8/0.08 = $100.00 per share
Current value of preferred share is $100.00
