EEyescom just issued some new preferred stock The issue will

E-Eyes.com just issued some new preferred stock. The issue will pay a constant quarterly dividend of $10.00 in perpetuity, beginning exactly one quarter from now. If the market requires an annual return of 17.00 percent with quarterly compounding, how much does a share of preferred stock cost today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

How much would a share of preferred stock cost today if the dividends begin exactly 8 years from now instead of next quarter? Don\'t forget that the PV formula for a perpetuity assumes the first payment is at the end of the first period. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Solution

cost of a preferred share = 10/(0.17/4) = 235.29

a share of preferred stock would cost = 235.29/(1 + 17%/4)³¹ = 64.75