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Morristown Industries has an issue of preferred stock outstanding that pays a $12.60 dividend every year in perpetuity. If the required return of this issue is 15.75%, what is the price per share

Respuesta :

Answer:

$80 per share.

Explanation:

Given: Dividend= $12.60

           Rate of return= 15.75%

  Now, finding the price per share.

Formula; Price per share= [tex]\frac{Dividend}{Rate\ of\ return}[/tex]

⇒ Price per share= [tex]\frac{12.60}{15.75\%}[/tex]

⇒ Price per share= [tex]\frac{12.60}{0.1575}[/tex]

∴ Price per share= $80 per share.

Hence, price per share is $80 for Morristown Industries.

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