A company’s series B, 8% preferred stock has the following features:
- A par value of $50, and it pays quarterly dividends.
- Its current market value is $35.
- The shares are retractable (at par) with the retraction date set for three years from today.
- Similarly rated preferred issues have an estimated nominal required rate of return of 12%.
- Analysts expect a sustainable growth rate of 4% for the company’s earnings.
The intrinsic value estimate of a share of this preferred issue is closest to:
D1 = 50* .08=4/4=1
r = .12/4= .03
V0 = 1/.03= 33.3
But the Answer is 45.02
What am I skipping?