Hooks Athletics, Inc., has outstanding a preferred stock with a par value of $30 that pays a dividend of $1.00. The preferred stock is redeemable at the option of the stockholder in 10 years at a price equal to $30. The stock may be called for redemption by the company in 15 years at a price of $34. (Any stock that is not redeemed at the end of 10 years can be expected to be called by the company in 15 years.) If you know that investors require a 12 percent pretax rate of return on this preferred stock, what is the current market value of this preferred stock?

Hooks Athletics, Inc., has outstanding a preferred stock with a par value of $30 that pays a dividend of $1.00. The preferred stock is redeemable at the option of the stockholder in 10 years at a price equal to $30. The stock may be called for redemption by the company in 15 years at a price of $34. (Any stock that is not redeemed at the end of 10 years can be expected to be called by the company in 15 years.) If you know that investors require a 12 percent pretax rate of return on this preferred stock, what is the current market value of this preferred stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 14P

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