The value of a preferred stock that pays a perpetual dividend of $220 at the end of each year when the interest rate is 3 percent is $7333.3
How to solve for the value of the
We have to use the formula
Present Value = CF / I
We have CF = 220 dollars
We have the interest rate = 3 percent
Hence present value = 220/0.03
= $7333.3
What is the present value?
This is the term that is used to refer to the future value that a stock would have when it is converted.
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