A firm has an issue of preferred stock outstanding that has a stated annual dividend of $4. The required return on the preferred stock has been estimated to be 16 percent. The value of the preferred stock is ________.
A) $64
B) $16
C) $25
D) $50

Question

Quizplus · Accepted Answer

The value of preferred stock is calculated by dividing the annual dividend by the required return. Thus, the value of the preferred stock is: 
Value = $4 / 0.16 = $25

A Firm Has an Issue of Preferred Stock Outstanding That