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    Question

    A company’s 1000 par preferred stock pays a Rs 50

    annual dividend and has a required rate of return is 8%. Calculate the value of the preferred stock.
    A 500 Correct Answer Incorrect Answer
    B 625 Correct Answer Incorrect Answer
    C 1000 Correct Answer Incorrect Answer
    D 800 Correct Answer Incorrect Answer
    E 900 Correct Answer Incorrect Answer

    Solution

    Cost of preferred stock = dividend / required rate of return = 50/0.08 =625

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