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McPhail Corporation $100 face value fixed-rate perpetual preferred stock pays an annual dividend of $5.75 per share. What is the value of one share of this stock to an investor who requires a rate of return of 6.25%

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Tundexi

Answer:

$92

Explanation:

Value per share of preferred stock = Annual dividend / Required rate of return

Annual dividend = $5.75 per share

Required rate of return = 6.25%

Value of one share of this stock = $5.75/6.25%

Value of one share of this stock = $5.75/0.0625

Value of one share of this stock = $92

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