Question

What is the value of Oriole Bancorp's perpetual preferred stock, considering it issued a few years ago with an annual dividend of $4.30 and a required rate of return of 12.5 percent?

Answer 1

To calculate the value of Oriole Bancorp's perpetual preferred stock, divide the dividend by the required rate of return.

Step-by-step explanation:

To calculate the value of Oriole Bancorp's perpetual preferred stock, we can use the formula:

Value of preferred stock = Dividend / Required rate of return

Plugging in the values:

Dividend = $4.30

Required rate of return = 12.5%

Converting the required rate of return to a decimal: 12.5% = 0.125

Calculating the value: $4.30 / 0.125 = $34.40

Therefore, the value of Oriole Bancorp's perpetual preferred stock is $34.40.