Question

A preferred stock from Hecla Mining Co. (HLPRB) pays $4.10 in annual dividends. If the required return on the preferred stock is 7.10 percent, what is the value of the stock? (Round your answer to 2 decimal places.)

Answer 1

Solution
	value of the stock     $	57.75
Working Notes:
	In case of preferred stock ,Dividends paid fixed and are in perpetuity nature
	The investor would be willing to pay is present value preferred dividends
	Stock price = Preferred Dividend/ Required rate of return
	Annual Preferred Dividend = $4.10 per share
	Required rate of return =7.10%
	Using DDM (Dividend discount model) without growth
	Stock price = Preferred Dividend/ Required rate of return
	=$4.10/7.10%
	=$57.74647887
	=$57.75