Answer:
The value of the preferred stock is 136.36.
Step-by-step explanation:
Consider the provided information.
The dividend rate is 15% or 0.15.
Per value of a preferred stock or face value is $100.
The appropriate discount rate for a stock of this risk level is 11% or 0.11.
Preferred Stock dividend = Face value × Dividend rate
Substitute the respective values in the above formula.
Preferred Stock Dividend = Face value × Dividend rate
= 100 × 0.15
= 15 per share
Value of preferred stock = [tex] \frac{\text{Preferred Stock Dividend }}{\text{Discount rate}}[/tex]
Value of preferred stock = [tex] \frac{15}{0.11}[/tex]
= [tex] 136.36[/tex]
Hence, the value of the preferred stock is 136.36.
