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