E-eyes has a new issue of preferred stock it calls 20/20 preferred. the stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. if you require a return of 10.5 percent on this stock, how much should you pay today? (do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) current stock price

$25.86.

Explanation:

To address this problem we first calculate the present value of all dividend received at time t = 20, then we discount that sum to time t = 0 (now).

The cashflow pattern of this preferred stock is similar to perpetuty.

Stock value at time t = 20 = Dividend/Required rate of return = 20/10.5% = 190.48

Stock value at time t = 0 = (Stock value at time t = 20)/(1 + Required rate of return)^20 = 190.48/(1 + 10.5%)^20 = 25.86.

a.

i would say iii (3) because in order to compare a price you have to use as a reference other near stores because it's its

hope i explained myself