Hi.

I have a difficulty with the understanding the logic of the answer to the following question (it appears in the one of the topic tests)

An investor gathered the following data:

Par value of preferred stock offered with a 6% dividend rate $100

Company’s sustainable growth rate 5%

Yield on comparable preferred stock issues 11.5%

Investor’s marginal tax rate 30%

The value of the company’s preferred stock is *closest* to: $96.92, $54.78 or $52.17

The correct answer is $52.17 = $100×0.060/0.115.

But I do not understand why it would be incorrect to use Gordon growth model?

Thank you