Ransom Industries Inc, has issued preferred stock that pays $3.00 divi

Ransom Industries Inc, has issued preferred stock that pays $3.00 dividends annually. If the market requires a 12.5% rate of return on the shares, what is the current price of the firm’s preferred shares?

A) $21.33
B) $24.00
C) $41.67
D) There is not enough information to answer this question.

ANSWER

B
Explanation: B) Price = Div/rate = $3/.125 = $24.00.