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Electric Utilities preferred stock will pay an annual dividend of $12 per share in perpetuity beginning 8 years from now. What is one share of this stock worth today if the market requires a return of 9.5 percent

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Tundexi

Answer:

The share of the stock is worth $66.92 today

Explanation:

PV7  = D8 / r

PV7 = 12 / 0.095  

PV7 = $126.3157894737

Hence, PV0 = 126.3157894737*(1 + 0.095)^7

PV0 = 126.3157894737*(1.095)^7

PV0 = 126.3157894737*1.887551

PV0 = $66.9204428895

PV0 = $66.92

Thus, the share of the stock is worth $66.92 today

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