Purchase Solution

# Stock valuation question: Calculate the maximum amount you would pay for the stock

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If a share of preferred stock has a \$75 par value, the stated dividend is 7% per year, and the required rate of return is 9%, what is the maximum price you should be willing to pay for this preferred stock?

##### Solution Summary

The solution explains the theory and makes the simple calculation to solve the problem.

##### Solution Preview

This simplifies into a perpetuity type problem. The dividend on the preferred amounts to \$5.25 (\$75 ...

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