Ask Question
25 February, 06:32

The Jones Company has decided to undertake a large project. Consequently, there is a need for additional funds. The financial manager plans to issue preferred stock with a perpetual annual dividend of $5 per share and a par value of $30. If the required return on this stock is currently 20 percent, what should be the stock's market value? Select one: a. $150 b. $100 c. $ 50 d. $ 25 e. $ 10

+3
Answers (1)
  1. 25 February, 08:50
    0
    stocks market value is $25

    so correct option is d

    Explanation:

    given data

    annual dividend = $5 per share

    par value = $30

    required return = 20%

    To find out

    stocks market value

    solution

    we consider stock market value is M

    we know here annual dividend is $5 per share

    so we can say

    annual dividend = market value * require return ... 1

    put here all these value

    annual dividend = market value * require return

    5 = 20% * M

    M = 5 / 20%

    M = 5 / 0.20

    M = 25

    stocks market value is $25

    so correct option is d
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Jones Company has decided to undertake a large project. Consequently, there is a need for additional funds. The financial manager plans ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers