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stranahan stranahan
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Posts: 3324
5 years ago
Willie's Western Corp. has outstanding nonconvertible preferred stock (cumulative) that pays a quarterly dividend of $1.25. If your required rate of return is 9.5%, what should you be willing to pay for 1000 shares of Willie's Western?
A) $52,611.58
B) $52,631.58
C) $52,621.58
D) $52,601.58
Textbook 

Financial Management: Core Concepts


Edition: 2nd
Author:
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Awful_HomieAwful_Homie
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Posts: 231
5 years ago
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More questions for this book are available here
B -- This situation is that of a perpetuity without growth that has a quarterly required rate of return of (0.095/4) = 0.2375. Thus, you should be willing to pay per share: P0 = ($1.25/0.02375) = $52.631579. For 1000 shares, you should be willing to pay 1000 times this, which is $52,631.58
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4 years ago
Thank you for  the help. I had a few questions on a few of them and this really confirmed my answers.
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Thx
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Thank you so much
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