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7. Valuing preferred stock Aa Aa a Companies that have preferred stock outstanding promise to pay a stated dividend for an infinite period. Preferred st0ck is treated like a perpetuity if the payments last forever. Preferred stocks are considered to be a hybrid of a st0ck and a bond. For example, one of the major differences between preferred shares and bonds is that the issuing companies can suspend the payment of their preferred dividends without throwing the c0mpany into bankruptcy. However, similar to bonds, preferred stockholders receive a fixed paymenttheir dividendbefore the company's residual earnings are paid out to its c0mmon stockholders and, as with common st0ck, preferred stockholders can benefit from an appreciation in the value of the firm's stock securities. Consider the following case of Lancashire Railway Company (LRC): Lancashire Railway Company (LRC) pays an annual dividend rate of 9.80% on its preferred stock that currently returns 13.13% and has a par value of $100.00 per share. What is the value of LRC's preferred stock? 0 $89.57 per share 0 $111.96 per share 0 $100.00 per share 0 $74.64 per share Suppose that due to high inflation, interest rates rise and pull the preferred stock's yield to 17.07%. The value of the preferred stock will