Question

The Fridge-Air Company's preferred stock pays a dividend of $4.50 per annually. If the required rate of return on comparable quality stocks is 14 percent, calculate the value of Fridge-Air's preferred stock.

Answer 1

Assuming that there is no capital gains, the value of Fridge-Air's preferred stock value should be $32.14285714285714 or $32.14(2 decimal places).

$4.50 / 14% = $32.14285714285714