Courtesy Bancorp issued perpetual preferred stock a few years ago. The bank pays an annual dividend of

Question:

Courtesy Bancorp issued perpetual preferred stock a few years ago. The bank pays an annual dividend of $4.27 and your required rate of return is 12.2 percent.

a. What is the value of the stock given your required rate of return?

b. Should you buy this stock if its current market price is $34.41? Explain.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...