Your required rate of return on company XYZ's preferred stock is 12%. Their preferred stock pays a fixed annual dividend of $4. A share of XYZ preferred is valued at

To determine the value of a share of XYZ's preferred stock, we can use the dividend discount model (DDM). The DDM calculates the present value of the expected future dividends paid by the stock.

The formula for the DDM is as follows:

\[ P = \frac{D}{r} \]

Where:
P = Price of the preferred stock
D = Dividend payment per share
r = Required rate of return

In this case, the dividend payment per share (D) is $4, and the required rate of return (r) is 12%. Plugging these values into the formula, we get:

\[ P = \frac{4}{0.12} \]

Simplifying, we find that the value of a share of XYZ's preferred stock is:

\[ P = 33.33 \]

Therefore, a share of XYZ's preferred stock is valued at approximately $33.33.

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