Purchase Solution

Preferred stock valuation: Jones Design

Not what you're looking for?

Ask Custom Question

Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has an $80 par value and pays an annual dividend of $6.40 per share. Similar-risk preferred stocks are currently earning a 9.3% annual rate of return.

a. What is the market value of the outstanding preferred stock?

b. If an investor purchases the preferred stock at the value calculated in part a, how much does she gain or lose per share if she sells the stock when the e=required return on similar-risk preferreds has risen to 10.5%? explain.

Purchase this Solution
Solution Summary

The solution explains how to calculate the market value of a preferred stock

Solution Preview

a. The market value is based in the current earnings. A preferred stock is a perpetuity and the market value is the present ...

Purchase this Solution
Free BrainMass Quizzes
Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

Social Media: Pinterest

This quiz introduces basic concepts of Pinterest social media

Motivation

This tests some key elements of major motivation theories.

Basic Social Media Concepts

The quiz will test your knowledge on basic social media concepts.

View More Free Quizzes
Related BrainMass Solutions

  • Solve: The Preferred Stock Valuation

    270557 Solve: The Preferred Stock Valuation Scenario: Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred stock issue has an $80 par value and pays an annual dividend of $6.40 per share.

  • Preferred stock valuation

    202464 Preferred stock valuation Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred stock issue has an $80 par value and pays an annual dividend of $6.40 per share.

  • impact of changing risk on share value

    3) Preferred stock valuation Jones Design wishes to estimate the value of its out-standing preferred stock. The preferred issue has an $ 80 par value and pays an annual dividend of $ 6.40 per share.

  • Valuation models of securities

    563298 Valuation models of securities 1. Imagine that on June 4, the Dow Jones Industrial Average closed at 13,598.14, which was up 148.86 points from the previous day's close of 13,449.28.

  • Variable growth, Preferred stock, market value, bond coupon rate

    PREFERRED STOCK VALUATION. Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has an $80 par value and pays an annual dividend of $6.40 share.

  • A Discussion On Preferred Stock Valuation

    Preferred stock valuation Preferred stock of ABC corporation pays an annual dividend at the rate of 4.5% per share.

  • DPS, Constant Growth, Corporate & Rate of Return - Valuation

    The solution performs DPS Calculation, Constant Growth Valuation, Corporate Valuation and Preferred stock rate of return in given examples.

  • Valuation of preferred stock Hybrid

    148501 Valuation of preferred stock Hybrid Preferred stock is said to be a hybrid between common stock and a bond, as the dividends must be paid before any dividends are paid to common stockholders.

  • Bond Valuation, Dividend Discount Model, Required Return, CAPM

    (Stock valuation) Suppose Toyota has non-maturing (perpetual) preferred stock outstanding that pays a $1.00 quarterly dividend and has a required return of 12% APR (3% per quarter). What is the stock worth? B3.

View More Related Solutions