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Up2
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
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Up0
The formula for a non-callable, non-convertible, preferred
perpetual stock is:V0 = D0 / r = $2.50 / 6.25% = $40
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