Answer:
The offer price will be $55.51
Explanation:
The constant cash flow over a indefinite period of time is the perpetuity. The dividend payment on the preferred is also considered as perpetuity because it pays the constant amount of dividend and there is no time limit for the payment.
Value of the preferred share can be determine by following formula
Value of Perpetuity / Cash flow / required rate of return
Price of share = Dividend Payment / Rate of return
Price of share = $6.8 / 12.25% = $55.51
