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What is the cost of preferred stock calculation?

I need to know more about preferred stock calculation.

asked by roxiee (87)

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Tags:  investing  value

answers

Simple! Price = dividend/ yield. Yield = required rate of return Dividend = dividend rate x par value Convert all percentages to numbers and make sure you get the statistics from reliable sources.

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posted by rejoice (216)
  • A good stock brokerage account will tell all these figures easily and accurately.
    posted by enlightened (206)
9 votes

Preferred Stock has both debt and common stock components. You can get dividends for it like common stock but the dividends are fixed. So it is predictable and can be calculatable. You need the par value, the preferred dividend rate, calculate the preferred dividend, get the yield.

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posted by theblip (294)
  • Just to add on. Par value is the claim of the preferred stockholder against the value of the firm.
    posted by addicted (186)
7 votes

The preferred stock price is mathematically derived by dividing the the preferred dividend by the required return on the stock. The formula is Pp=Dp/r.

  • I assume that Pp is Preferred Stock Price, Dp is preferred Dividend and r is Required Return.
    posted by icyblue (235)
5 votes

The cost of preferred stock calculation you must find the sum of. The cost od debit Cost preffered stock Cost of equity. To derive the cost of capital each of its components must be calculated.

3 votes

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