Type the Excel formula for the price of a preferred share paying $1.10 a quarter when the market requires a 5.5 % return.
Type the Excel formula for the price of a preferred share paying $1.10 a quarter when the market requires a 5.5 % return.
Answer
=1.10*4/0.055
4.40 ÷ 0.055 = 80.00 — a level perpetuity: annual dividend over the required return.
Bigel, Introduction to Financial Analysis (CC BY 4.0) §14.4 — no-growth DDM equals a perpetuity, shape only; §2.7; OpenStax Principles of Finance §11.4 — reference only; original company and figures