Marston Manufacturing Company pays an annual dividend rate of 10.00% on its preferred stock that currently returns 13.40% and has a par value of $100.00 per share. What is the value of Marston's preferred stock?

The price of the stock is $75 rounded to the nearest dollar

Explanation:

The question here demands to know the value of Marston preferred stock. This can be evaluated mathematically as follows:

In the question, we identify the following values:

The annual dividend rate on preferred stock = 10%

Return on preferred stock = 13.4%

The Par value = $100 per share.

Mathematically:

Return on preferred stock = Annual dividend rate on preferred stock divided by Price of stock

Hence, price of stock = 10% of $100/0.1340 = 10/0.1340 = $74.63

This is $75 rounded to the nearest dollar

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