Market value of the outstanding preferred stock

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Mr. Kamrul wishes to estimate the value of its outstanding preferred stock. The preferred issue has a Tk. 80 par value and pays an annual dividend of Tk. 6.50 per share. Similar-risk preferred stocks are currently earning 8.50% annual rate of return.

(i) What is the market value of the outstanding preferred stock?

(ii) If Kamrul purchases the preferred stock at the value calculated in part (i), how much does he gain or lose per share if he sells the stock when the required return on similar risk preferred stocks has risen to 11%? Explain.

Reference no: EM132577419

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