To calculate the value of preferred stock, we can use the formula for the present value of a perpetuity, since preferred stock typically pays a fixed dividend indefinitely. The formula is:
\[ \text{Value of Preferred Stock} = \frac{D}{r} \]
Where:
- \( D \) is the dividend per share,
- \( r \) is the discount rate (required rate of return).
In this case:
- \( D = 3.83 \) (the annual dividend)
- \( r = 0.1138 \) (the discount rate as a decimal)
Now, we can plug in the values:
\[ \text{Value of Preferred Stock} = \frac{3.83}{0.1138} \]
Calculating that gives:
\[ \text{Value of Preferred Stock} = 33.64 \]
Thus, the value of the preferred stock is approximately $33.64.
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