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    Value of stock that pays the first dividend 20 years later

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    E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today.

    If you require a 9.00 percent return on this stock, how much should you pay today?

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    Solution Preview

    The value of any financial asset is the discounted value of cash flows associated with that asset
    We have a perpetuity of $ 20 ...

    Solution Summary

    Value of a stock that would pay the first dividend 20 years from today.