Preferred dividend is Rs 50 and required rate of return is 2.5% then value of preferred stock would be

Rs 20.00
Rs 125.00
Rs 2,000.00
Rs 52.50

The correct answer is: D. Rs 52.50

Preferred stock is a type of stock

74.6 75.5c-23.5 6.3-42 24.9-48.3 48.6-11.4 42.9-11.4 132.3-11.4 132.3s0 89.4 11.4 132.3c6.3 23.7 24.8 41.5 48.3 47.8C117.2 448 288 448 288 448s170.8 0 213.4-11.5c23.5-6.3 42-24.2 48.3-47.8 11.4-42.9 11.4-132.3 11.4-132.3s0-89.4-11.4-132.3zm-317.5 213.5V175.2l142.7 81.2-142.7 81.2z"/> Subscribe on YouTube
that pays a fixed dividend. The value of preferred stock is determined by the following formula:

Value of preferred stock = Preferred dividend / Required rate of return

In this case, the preferred dividend is Rs 50 and the required rate of return is 2.5%. Therefore, the value of preferred stock is:

Value of preferred stock = Rs 50 / 2.5% = Rs 52.50

Option A is incorrect because it is the value of a common stock. Option B is incorrect because it is the value of a preferred stock with a required rate of return of 10%. Option C is incorrect because it is the value of a preferred stock with a preferred dividend of Rs 200.

Exit mobile version