Wernam Hogg Class a Preferred Shares Have a Par Value

question 78

Multiple Choice

Wernam Hogg Class A preferred shares have a par value of $100 and offer an annual dividend at 0.8% of par value.Wernham Hogg is experiencing cash flow problems due to poor market conditions in the commercial paper business.The company has suspended dividends on the Class A preferred shares.Analysts do not expect the dividends to resume for another 3 years,at which point they are expected to resume in perpetuity.If investors require a return of 2.25%,then what is the fair price for the preferred shares today?

• A) $34.01
• B) $34.77
• C) $35.56
• D) $96.65
• E) $340.08

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