Outline of Session Outline of Session 4

Preferred Stock Valuation
Use DCF method.
Discount preferred dividends at the
appropriate discount rate to obtain the
price of preferred stock.
For example:
XYZ preferred stock pays 1−Baht dividend. If you
discount at 10%, you get a price of 10 Baht per share.
1 1
Preferred Stock Price
+
2
=
( 1 + 10% ) ( 1 + 10% ) ( 1 + 10% )
1
10%
= 10 Baht
+ ... +
=
∞
1
Last Updated: June 11, 2009 © 2009 Charn Soranakom, Ph.D. Session 4 | Slide 18 of 19