Corporate Finance Q96

96MTI issued a noncallable, nonconvertible, fixed rate perpetual preferred stock five years ago. The stock was issued at $15 per share with a $1.25 dividend. If the company were to issue preferred stock today, the yield would be 8.75 percent. The stock’s current value is closest to:

Option : C
Explanation : Value of preferred stock = Pp = Dp / Rp P = 1.25 / 0.0875 = $14.29

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