Valuing Preferred Stock?

Question

E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today. If you require an 8 percent return on this stock, how much should you pay today?

I know the answer is $57.93 but I dunno how to set up the equation or if I can use my TI-83

Answer 1

You have to first value the perpetuity stream starting 20 years from today. The time value of the perpetuity stream at the end of the 19th year would be = 20/0.08 = 250.

Now calculate the time value of this cash flow at the end of 19th year to today using = 250/(1.08)^19 = $57.928