Taylor Inc. has preferred perpetual stock outstanding that has a par value of $100 per share and a dividend yield of 9.4% of stated value. If the appropriate interest rate for Taylor’s preferred stock is 8.3%, how much is each share of preferred stock worth?

Question

Taylor Inc. has preferred perpetual stock outstanding that has a par value of $100 per share and a dividend yield of 9.4% of stated value.  If the appropriate interest rate for Taylor’s preferred stock is 8.3%, how much is each share of preferred stock worth?

Christie · Answer

Figured it out: dividend yield x par value divided by interest rate .094*100/.083 = $113.25