Ezzell Corporation issued preferred stock with a stated dividend of 10 percent of par. Preferred stock of

Question:

Ezzell Corporation issued preferred stock with a stated dividend of 10 percent of par. Preferred stock of this type currently yields 8 percent, and the par value is $100. Assume dividends are paid annually.

a. What is the value of Ezzell’s preferred stock?

b. Suppose interest rate levels rise to the point where the preferred stock now yields 12 percent. What would be the value of Ezzell’s preferred stock?

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... 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... 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,...