18. North Park International LLC has issued preferred stock ($65 par value) that pays an annual dividend of $5.80. The preferred stock matures in 20 years. At that time, holders of the stock will receive, at their option, either $65 or one share of common stock with a value up to $90. If the common stock is trading at a price above $90, the preferred stockholders will receive a fractional share of common stock worth $90. The current common stock pays a $1.5 per share dividend. This dividend is expected to grow at a 3 percent rate per year for the next 20 years. If the market requires a 24% rate of return on a stock of this risk and maturity, what is the maximum value for which the share can be expected to trade?
A. $25.06
B. $136.12
C. $23.84
D. $24.72
18. North Park International LLC has issued preferred stock ($65 par value) that pays an annual dividend of $5.80. The preferred stock matures in 20 years. At that time, holders of the stock will receive, at their option, either $65 or one share of common stock with a value up to $90. If the common stock is trading at a price above $90, the preferred stockholders will receive a fractional share of common stock worth $90. The current common stock pays a $1.5 per share dividend. This dividend is expected to grow at a 3 percent rate per year for the next 20 years. If the market requires a 24% rate of return on a stock of this risk and maturity, what is the maximum value for which the share can be expected to trade?
A. $25.06
B. $136.12
C. $23.84
D. $24.72
