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17 November, 16:58

Lindor inc.'s $100 par value preferred stock pays a dividend fixed at 8% of par. to earn 12% on an investment in this stock, you need to purchase the shares at a per share price of

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  1. 17 November, 17:20
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    Answer: $66.67

    Explanation:

    Lindor inc.'s $100 par value preferred stock pays a dividend fixed at 8% of par. to earn 12% on an investment in this stock, you need to purchase the shares at a per share price of;

    Given the following:

    Par value of preferred stock = $100

    Fixed Dividend rate = 8% of par

    Expected return on investment (r) = 12%

    Purchase price of this stock in other to earn 12%:

    Per share price is given by:

    (par value * Dividend rate) / expected return

    ($100 * 0.08) / 0.12

    $8 / 0.12 = $66.6666

    = $66.67
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