Given that the preferred shares on the balance sheet is $2100,000 , have a stated value of $21, callable at $22.50, and pay annual dividend of $2 , and are non-voting. What is the value of redemption premium?
To calculate the value of the redemption premium, you need to find the difference between the stated value and the redemption value of the preferred shares.
The stated value is given as $21. This means that each preferred share has a stated value of $21.
The redemption value is the price at which the shares can be bought back by the company. In this case, the preferred shares are callable at $22.50, meaning the company can repurchase the shares at $22.50 per share.
To find the redemption premium, subtract the stated value from the redemption value:
Redemption Premium = Redemption Value - Stated Value
In this case, the redemption value is $22.50 and the stated value is $21:
Redemption Premium = $22.50 - $21
Redemption Premium = $1.50
Therefore, the value of the redemption premium for each preferred share is $1.50.