Your company is considering an issue of preference shares. The market is currently expecting a return of 7 percent and your company expects earnings per share to be $10.10 and the dividend for preference shares to be $1.40. i) What will be the issue price of a preference share? $20

Your company is considering an issue of preference shares. The market is currently expecting a return of 7 percent and your company expects earnings per share to be $10.10 and the dividend for preference shares to be $1.40. i) What will be the issue price of a preference share? $20

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 5P: A company currently pays a dividend of $2 per share (D0 = $2). It is estimated that the company’s...

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Your company is considering an issue of preference shares. The market is currently expecting a return of 7 percent and your company expects earnings per share to be $10.10 and the dividend for preference
shares to be $1.40. i) What will be the issue price of a preference share? $20

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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