Jones design wishes to estimate the value of its


Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of $120 and pays an annual dividend of $6.60 per share. Similar-risk preferred stocks are currently earning an annual rate of return of 10.2%. A) What is the market value of an outstanding preferred stock? B) If an investor purchased the preferred stock at the value calculated in part A, how much does she gain or lose per share if she sells the stock when the required return on similar-risk preferred stocks has risen to 11.4%?

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