CHAPTER 5

Solving this equation for the dividend gives us: D0 = $50(.14 – .08) / (1.08) = $2.78. 20. The price of a share of preferred stock is the dividend payment divided by the required return. We know the dividend payment in Year 6, so we can find the price of the stock in Year 5, one year before the first dividend payment. Doing so, we get: ................
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