Problem 3. Preferred stock valuation: PS₀ = D_p/r_p

Even Fabricators wants to estimate the value of its outstanding preferred stock. The preferred issue has an $90 par value and pays an annual dividend of $7.20. Similar risk preferred stocks are currently earning a 10.2% annual rate of return.

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

a. PS₀ =

b. If an investor purchases the preferred stock at the value calculated in part a ; how much do they gain or lose per share if they sell the stock at a required return of 11.4%.

PS₀ =

The investor would lose how much per share?