Homework: Chapter $7-$ Stock Valuation

Question $6,$ P$7-7($similar to$)$

HW Score: $50\%,4$ of $8$ points $($HW$)$

Part $1$ of $3$

Points: $0$ of $1$

Preferred stock valuation Jones Design wishes to estimate the value of its outstanding preferred stock. The preferred issue has a par value of $$60$ and pays an annual dividend of $$4\mathrm{.}70$ per share. Similar$-$risk preferred stocks are currently earning an annual rate of return of $7\mathrm{.}7\%.$

a$.$ What is the market value of the outstanding preferred stock?

b$.$ If an investor purchases the preferred stock at the value calculated in part a$,$ how much does she gain or lose per share if she sells the stock when the required return on similar$-$risk preferred stocks has risen to $9\mathrm{.}0\%?$

a$.$ The market value of the outstanding preferred stock is $ per share. $($Round to the nearest cent.$)$

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