The Sentinel Corporation has an issue of preferred stock tha

The Sentinel Corporation has an issue of preferred stock that pays a dividend of $5.00 a share. If the appropriate cost of capital is 12%, what would you expect the market price of this stock to be? Round your answer to the nearest cent.

$60.00

$41.67

$22.41

$24.00

Solution

Market price=Annual dividend/Cost of capital

which is equal to

=($5/0.12)

which is equal to

=$41.67(Approx).