Preferred stock of 6$ dividend
sustainable growth rate of company is 5%
yield on comparable stocks is 11.5%
marginal tax rate is 30%
value the stock of the company
the answer is 6/0.115 = 52$
why did we not use the growth rate in the denominator? I would have gotten ninety something dollars if : 6/ (0.115-0.05)
is it a rule for preferred stocks to not use growth rate??
sustainable growth rate of company is 5%
yield on comparable stocks is 11.5%
marginal tax rate is 30%
value the stock of the company
the answer is 6/0.115 = 52$
why did we not use the growth rate in the denominator? I would have gotten ninety something dollars if : 6/ (0.115-0.05)
is it a rule for preferred stocks to not use growth rate??