Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%, and its par value is $100. a. What is the stock's value? b. Suppose interest rates rise and pull the preferred stock's yield up to 15%. What would be its new market value?

Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 10%, and its par value is $100. a. What is the stock's value? b. Suppose interest rates rise and pull the preferred stock's yield up to 15%. What would be its new market value?

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 3P

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Question

Stock valuation

Ezzell Corporation issued perpetual preferred
stock with a 10% annual dividend. The stock
currently yields 10%, and its par value is $100.
a. What is the stock's value?
b. Suppose interest rates rise and pull the
preferred stock's yield up to 15%. What would
be its new market value?

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