Purchase Solution

Value of a preferred stock and yield

Not what you're looking for?

Ask Custom Question

North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $6 per share. With the passage of time, yields have soared from the original 6 percent to 14 percent (yield is the same as required rate of return).

a. What was the original issue price?
b. What is the current value of this preferred stock?
c. If the yield on the Standard & Poor's Preferred Stock Index declines, how will the price of the preferred stock be affected?

Purchase this Solution
Solution Summary

The problem provides solution to North Pole Cruise Lines preferred stock value. It calculates the original issue price from fixed dividend and yield, calculates the current value fusing fixed dividend and current yield and discuss the effect of change in S&P preferred stock index on the value of the preferred stock.

Solution Preview

a) Original issue price = Fixed Dividend / Initial yield = $6/6%=$100
b) ...

Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Organizational Behavior (OB)

The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

IPOs

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

View More Free Quizzes
Related BrainMass Solutions

  • Preferred Stock

    476854 Preferred Stock Barnes Air Conditioning, Inc., has two classes of preferred stock: floating rate preferred stock and straight (normal) preferred stock. Both issues have a par value of $100.

  • Calculating current and original Value of a preference share

    This would result in increasing the market value of the preferred stock. This problem explains how to calculate the original price and current price of a preferred stock.

  • Parsons, Inc. Balance Sheet Problems

    Explain why one preferred stock might yield less than another. A. We can calculate the number of shares using the total amount in common stock account and the par value.

  • The answer to preferred stock

    88300 The answer to preferred stock I need all the help and directions (formulas) I can get! Preferred stock value North Pole Cruise Lines issued preferred stock many years ago. It carries a fixed dividend of $6 per share.

  • Preferred Stock Value

    The preferred stock is a perpetuity and so the yield on a preferred stock is given as Dividend Amount/Price. The original yield at the time of issue as 6%. The dividend amount is $6.

  • Preferred Stock Valuation

    The preferred stock is a perpetuity and so the yield on a preferred stock is given as Dividend Amount/Price. Yield = Dividend Amount/Price The original yield at the time of issue as 6%. The dividend amount is $6.

  • Preferred Stock

    The preferred stock is a perpetuity and so the yield on a preferred stock is given as Dividend Amount/Price. Yield = Dividend Amount/Price The original yield at the time of issue as 6%. The dividend amount is $6.

  • Calculate the current yield of cost of preferred stock.

    Current Yield on a Preferred Stock = Dividend / Current Price Dividend = Par value * Yield at the time of issue = 100*8%=$8.00 Current Yield on a Preferred Stock = 8.00/75.00=0.10667 or 10.667% The expert calculates the current yield of preferred stocks

  • Preferred Stock Value - North Pole Cruise Lines

    This solution is comprised of a detailed explanation to answer the original issue price of North Pole Cruise, current value of this preferred stock, and the price of the preferred stock if the yield on the Standard & Poor's Preferred Stock Index declines

View More Related Solutions