If a preferred stock dividend rate is 8 percent, the par value is $100, and the discount rate for similar risk securities is 7 percent, what is the value of the stock per share (rounded to the nearest dollar)?

If a preferred stock dividend rate is 8 percent, the par value is $100, and the discount rate for similar risk securities is 7 percent, what is the value of the stock per share (rounded to the nearest dollar)?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 21MC

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Concept explainers

Stock Yields

The stock yield is otherwise known as the dividend yield. The dividend yield is an annual payment of the stock dividends to the holder of a firm’s stock. The dividend yield is a financial ratio to measure the value of dividend payout every year for the relative stock price. The yield of a stock is usually shown in a percentage that discloses the expected future earnings from stock depending on the current stock price in the future. Stock yield will change depending on the market fluctuations and in accordance with the market fluctuations, the dividends will be increased or decreased by the firm.

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If a preferred stock dividend rate is 8 percent, the par value is $100, and the
discount rate for similar risk securities is 7 percent, what is the value of the stock per
share (rounded to the nearest dollar)?

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