The preferred stock of General Motors pays an annual dividend of $1.6 forever. The appropriate discount rate is 7% per year. Attempt 1/3 for 10 pts. Part 1 What is the present value of all dividends

Present Value of all dividends = $22,857,142.86

Explanation:

A perpetuity is a series of cash flows that is receivable or payable for indefinitely number of years

The present value of a perpetuity is determined as follows:

PV = A/r

PV - Present value of a perpetuity, A - annual cash flow (dividend), - 1,600,000 r - interest rate - 7%

PV = 1,600,00 : 0.07 = 22,857,142.86

Present Value of all dividends = $22,857,142.86