CFA Latest CFA Level 1 Discussions Question of the Week – Equity

Question of the Week – Equity

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    • AdaptPrep
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      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
    • AdaptPrep
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      The formula for a non-callable, non-convertible, preferred
      perpetual stock is:

      V0 = D0 / r = $2.50 / 6.25% = $40

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