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    Preferred Stock

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    XYZ Corporation issued common stock that had a required rate of return of 12%, the stock's beta is 1.75, the next dividend is expected to be $2.50 and the risk free rate of return is 5%. XYZ Corporation also issued preferred stock that has a stated dividend of 10% of par. Preferred stock of this type currently yields 8% and the par value is $100. Assume that both common and preferred dividends are paid annually. What is the value of XYZ Corp's preferred stock?

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    Solution Summary

    The expert examines preferred and common stock.