Question

A preferred share of Coquihalla Corporation will pay a dividend of $8 in the upcoming year and every year thereafter; that is, dividends are not expected to grow. You require a return of 7% on this stock. Using the constant-growth DDM to calculate the value of Coquihalla Corporation is worth _________. A. $13.50 B. $45.50 C. $91 D. $114.29

Answer 1

$114.29

Step-by-step explanation:

A preferred share of Coquihalla corporation will pay a dividend of $8

The return on the stock is 7%

= 7/100

= 0.07

Therefore, by using the constant growth DMM the worth of the corporation can be calculated as follows

Vo= 8/0.07

= $114.29

Hence the value of Coquihalla corporation is worth $114.29