CHAPTER 7 Stock Valuation 395 p7-6 Preferred stock valuation Segwick Manufacturing has an outstanding preferred stock issue with a par value of $50 per share. The preferred shares pay dividends an- nually at a rate of 5%. a. What is the annual dividend on Segwick's preferred stock? b. If investors require a return of 6% on this stock and the next dividend is payable one year from now, what is the price of Segwick's preferred stock? c. Suppose that Segwick has not paid dividends on its preferred shares in the past two years, but investors believe it will start paying dividends again in one year. What is the value of Segwick's preferred stock if it is cumulative and if investors require a 6% rate of return