Knowee
Questions
Features
Study Tools

Each quarter, A company pays a dividend on its perpetual preference shares. Today, the share is selling at $83.45(P0). If the required rate of return for such shares is 10.5%, what is the quarterly dividend paid by this company?

Question

Each quarter, A company pays a dividend on its perpetual preference shares. Today, the share is selling at $83.45(P0). If the required rate of return for such shares is 10.5%, what is the quarterly dividend paid by this company?

🧐 Not the exact question you are looking for?Go ask a question

Solution

The formula to calculate the dividend for a perpetual preferred stock is:

Dividend = Price * Rate of Return

Given that the price (P0) is $83.45 and the rate of return is 10.5% annually, we first need to adjust the rate of return for a quarterly period since the dividend is paid quarterly.

The quarterly rate of return is 10.5% / 4 = 2.625%

Now, we can calculate the dividend:

Dividend = 83.452.62583.45 * 2.625% = 2.19

So, the company pays a quarterly dividend of approximately $2.19 per share.

This problem has been solved

Similar Questions

Each quarter, Transam Ltd pays a dividend on its perpetual preference share. Today, the share isselling at $83.45. If the required rate of return for such shares is 10.5 percent, what is the quarterly dividendpaid by this company?

Richard, Inc., will pay a quarterly dividend per share of $1.15 at the end of each of the next 12 quarters. Thereafter, the dividend will grow at a quarterly rate of 1.7 percent forever. The appropriate rate of return on the stock is 12 percent, compounded quarterly. What is the current stock price?

A share just paid a dividend of $0.60. The dividend is expected to increase at an annual rate of 4% forever. If the required return is 10%, what is a fair value of this share today? Group of answer choices $11.00 $6.24 $0.62 $10.00 $10.40

A company just paid an annual dividend of €1.25 per share. If the required annual rate of return is 14% and dividends are expected to grow indefinitely at a constant rate of 8%, the company’s intrinsic value per share is closest to:A.€16.88.B.€20.83.C.€22.50.

Your firm has a dividend policy that pays constant dividend of $1 per share to ordinary shareholders perpetually. Given your firm’s shareholders’ required rate of return of 5%, calculate the firm’s share price.Group of answer choices$20.00$2.00$200.00$0.05Next

1/3

Upgrade your grade with Knowee

Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.