What is the fair price for the preferred shares

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Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% of par value.

Wernham Hogg is experiencing cash flow problems due to poor market conditions in the commercial paper business. The company has suspended dividends on the Class A preferred shares. Analysts do not expect the dividends to resume for another 3 years, at which point they are expected to resume in perpetuity.

If investors require a return of 2.25%, then what is the fair price for the preferred shares today?

A) $34.01

B) $34.77

C) $35.56

D) $96.65

E) $340.08

Reference no: EM131147787

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