Because of declining sales, Wayne Enterprises Inc. announced today that it is suspending dividend payments on its preferred shares. The shares have a 5.8% annual dividend, have a par value of $55, and are not cumulative. The next dividend would have been paid tomorrow(if it were not suspended). Analysts expectWayne's profits to rebound strongly in the coming year and also expect Wayne to resume regular annual dividend payments of $3.19 in two years. What is the fair price for the shares today if investors require a return of 7.2%?

Explain the step-by-step process of how the answer is $41.33?

Answer rating: 100% (QA)

To determine the fair price of the preferred shares we need to calculate the present value of all fu... View the full answer