calcualte preferred stock value

[chinni234]

Hi,

I saw two formulas for calculating preferred stock

Formula I p0 = d1/k
Formula II p0 = d1/k-g

If growth is not mentioned, do I assume as 0 and user formula I?

 

[JoeyDVivre]

Preferred stock always (I guess) has a fixed dividend. That means use II with g = 0 or use I.

 

[s_sabiran]

D1/p= can only be used in case of nonconvertible, noncalleble preffered stock, that has fixed dividend rate and no maturity .

 

[JoeyDVivre]

And even then it's mostly useless because valuation of preferred stock depends on credit quality. Preferred stock is really debt that has no claim on anything when the company goes @#$%& up. Preferred stock gets absolutely pillaged when management announces that it is not paying a dividend (the common does too of course).