Question

Three corporations (X, Y, Z) have preferred stock. The current stock price per share and dividend...

Three corporations (X, Y, Z) have preferred stock. The current stock price per share and dividend per share of the preferred stock of X, Y, and Z are shown below.

X: stock price = $50, dividend per share = $3

Y: stock price = $60, dividend per share = $4

Z: stock price = $80, dividend per share = $4

If you calculate the cost of the preferred cost stock (RP) for each and list these in order from HIGHEST RP to LOWEST RP, the correct order is _____.

Homework Answers

Answer #1

Formula to calculate Cost of the preferred stock (RP)

                        Cost of the preferred stock (RP)= (dividend)/P0 Price

Thus for X -----> Cost of the preferred stock (RP)= 3/50 = 6%

Y----->          Cost the preferred stock (RP)= 4/60 = 6.66%

Z -------->     Cost the preferred stock (RP)= 4/80 = 5%

   Thus highest RP to Lowest Rp = First will be y , Second will be X , third will be Z

Therefore correct order is Y,X,Z

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