question archive Superior Cement Company has an 8 percent preferred stock issue outstanding, with each share having a $100 face value
Superior Cement Company has an 8 percent preferred stock issue outstanding, with each share having a $100 face value
Subject:AccountingPrice:2.87 Bought7
Superior Cement Company has an 8 percent preferred stock issue outstanding, with each share having a $100 face value. Currently, the yield is 10 percent. What is the market price per share? If interest rates in general should rise so that the required return becomes 12 percent, what will happen to the market price per share?
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Answer:
Market price per share is $80
Market price per share is $66.67
Step-by-step explanation
A.
Face value =$100
Preferred Dividend rate = 8%
Preferred Dividend = 100*8% =$8
Yield rate = 10%
Current Price of Preferred Stock = Dividend/yield rate
=8/10%
=$80
So Market price per share is $80
B. Required Return or yield rate = 12%
Current Price of Preferred Stock = Dividend/yield rate
=8/12%
=$66.67
Market price per share is $66.67
