Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 8%, and

Question:

Ezzell Corporation issued perpetual preferred stock with a 10% annual dividend. The stock currently yields 8%, and its par value is $100.

a. What is the stock’s value?

b. Suppose interest rates rise and pull the preferred stock’s yield up to 12%. What is its new market value?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...