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1 January, 18:23

Carby Hardware has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell

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  1. 1 January, 18:29
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    The answer is $115.38

    Explanation:

    Solution

    Given that

    The annual dividend on preferred stock = $7.50

    Required return on preferred stock + = 6.5%

    The next step is to find at what price should the preferred stock sell which is given as follows:

    The rice of preferred stock = 7.50/6.5%

    = $115.38

    $115.38 is the price at which the stock preferred was sold.
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