Determine the value of a share of DuPont Series A $4.50cumulative preferred stoc

Question

Determine the value of a share of DuPont Series A $4.50cumulative preferred stock, no par, to an investor who requires a 9percent rate of return on this security. The issue iscallable at $120 per shar accrued dividends. However, theissue is not expected to be called at any time in theforeseeable future. Determine the value of a share of DuPont Series A $4.50cumulative preferred stock, no par, to an investor who requires a 9percent rate of return on this security. The issue iscallable at $120 per shar accrued dividends. However, theissue is not expected to be called at any time in theforeseeable future.

Explanation / Answer

Preferred Stock Dividend (DP) = $4.50 Required return on stock (r )   = 9% Value of Preferred stock (PP) = DP/ r                                       PP   = $4.50 /0.09 Valur of Preferredshare           = $50 Preferred Stock Dividend (DP) = $4.50 Required return on stock (r )   = 9% Value of Preferred stock (PP) = DP/ r                                       PP   = $4.50 /0.09 Valur of Preferredshare           = $50

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