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Graphical Designs is offering 20-20 preferred stock. The stock will pay an annual dividend of $20...

Graphical Designs is offering 20-20 preferred stock. The stock will pay an annual dividend of $20 with the first dividend payment occurring 20 years from today. The required return on this stock is 4.30 percent. What is the price of the stock today?

Multiple Choice

  • $209.01

  • $200.39

  • $196.26

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Homework Answers

Answer #1

option (b) i.e. $200.39 is the correct answer.

CALCULATION OF STOCK PRICE TODAY-

​​​​​​Stock price (Po) =

where, D20= dividend at 20th year

Ke = required return on stock

Stock price =

Stock price =

Stock price = $200.39

Incase of any doubt, please comment below. I would be happy to help.

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