The Fridge-Air Company's preferred stock pays a dividend of $4.50 per share annually. If the required rate of return on comparable quality preferred stocks is 14 percent, calculate the value of Fridge-Air's preferred stock.

Present value = $32.1428 rounded off to $32.14

Explanation:

The preferred stock is a stock that pays a constant dividend and after equal interval of time for an indefinite period. Thus, it is like a perpetuity. The formula for the present value of perpetuity is,

Present value = Cash flow / r

Where,

In case pf preferred stock, the cash flow is the dividend paid by the preferred stock.

So, the value of the preferred stock is,

Present Value = 4.5 / 0.14

Present value = $32.1428 rounded off to $32.14

i'm pretty sure the answer is 60.

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