You are provided with the following information on a non-callable, non-convertible preferred stock: Face value: $50 Annual dividend: $2.50 Maturity: Perpetual Embedded options: None Required rate of return: 6.25% The intrinsic value of this stock is closest to: $40 $50 $60

The formula for a non-callable, non-convertible, preferred perpetual stock is: V0 = D0 / r = $2.50 / 6.25% = $40

Question Of The Week - Equity (8) - CFA Level 1

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