- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 21. Discounted Dividend Valuation
- Subject 2. The Dividend Discount Model
CFA Practice Question
Estimate the value of a fixed rate perpetual preferred stock with a $100 par value, a $15 dividend per annum, and a 12% required rate of return.
Correct Answer: Value = dividend / required rate of return = $15/0.12 = $125.
User Contributed Comments 5
| User | Comment |
|---|---|
| danlan2 | Par value does not matter. |
| ostrich | It could matter for impairment tests as well as issue of warrants, options, etc. |
| ljamieson | It could, but it doesn't. |
| ashish100 | It doesn't, but it could. |
| UcheSam | For this question, it doesn't. |