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Allisa [31]
1 year ago
12

Peppercorn Inc. has outstanding nonconvertible preferred stock​ (cumulative) that pays a quarterly dividend of​ $1.00. If your r

equired rate of return is​ 8.0%, what should you be willing to pay for 1000 shares of the​ firm?
Business
1 answer:
Morgarella [4.7K]1 year ago
5 0

Answer:

Quarterly dividend = $1.00

Required rate of return per annum = 8% = 0.08

Quarterly rate of return = 0.08/4 = 0.02

Current market price = <u>Quarterly dividend</u>

                                      Quarterly required rate of return

                                   = $1.00

                                       0.08

                                   = $12.5      

The amount to pay for 1,000 shares = $1.25 x 1,000 = $12,500

                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Explanation:

The current market price is calculated as quarterly dividend paid divided by quarterly required rate of return. Then, we will multiply the current market price by the number of shares in order to determine the total amount to pay for the shares.

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Brilliant_brown [7]

Answer:

The Journal entry is as follows:

On March 31st,

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Basile [38]

Answer:

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