What is the present value of a preference share that is expected to pay a dividend of 12 cents per year in perpetuity if the discount rate is 7.5% per annum?
A)$1.72
B)$1.60
C)$2.72
D)$0.625

Question

Quizplus · Accepted Answer

The present value of a perpetuity is calculated using the formula PV = D / r, where D is the annual dividend and r is the discount rate. Here, PV = 0.12 / 0.075 = $1.60.

What Is the Present Value of a Preference Share That