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What price should Buttercup's expect to receive per share for this stock offering?

Buttercup's N More wants to offer some preferred stock that pays an annual dividend of $2.00 per share. The company has determined that stocks with familiar characteristics provide a 9 percent rate of return. What price should Buttercup's expect to receive per share for this stock offering?

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Hello!
The price of the stock is the present value of its flow of dividends, discounted at the rate of return for similar stocks (in this case, 9%). Assuming that the ...

Solution Summary

A classic problem! Computations done for you "long hand" rather than in Excel or using a financial calculator.

$2.19