Explain the difference between valuing for preferred stock and common stock and how to calculate for each. Be sure to support your statements with logic and argument, citing any sources referenced.

Preferred shares are equity that is being issued with fix rate of dividend. The company issue preference shares for project expansion. These shareholders don’t get voting right as compared with equity shareholders. On the other hand, common equity shares are the most popular type of equity being issued. They are the real owner of the company. In the event of liquidation, the common shareholders will have a residual claim over the assets of the firm after all debt and preferred stock have been paid. Common equity shareholders have voting right in the event of a major decision such as mergers and acquisitions, selection of directors, the appointment of auditors, etc. The value of the preferred stock is equal to the present value of all future dividends. The value of preferred stock is. Annual dividend/required rate of return. The preferred shareholders generally receive fixed dividends from retained earnings and they are always given priority ahead of common shareholders when dividends are being paid at the end of the year. The value of preferred stock is the Annual dividend/required rate of return. The dividend is equal to the Face value of the preference share multiplied by the rate of dividend on Preference shares. (collective, 2021) On the other hand, equity value shares are valued by the Dividend discount model which is also known as the Gordan growth model. This model assumes that the company will pay a stable dividend the future to shareholders. (CHEN, 2022) The stock value is computed using the following formula: Price of share = D1 /(r - g) Where: D1 = Next Year's Dividend r = Required rate of / 100 g = annual dividend growth rate In case of different dividends over the period, the common stock value – =Sum of all future dividends discounted separately at a discount rate. References (n.d.). Retrieved from https://www.investopedia.com/terms/s/shareholdersequity.asp CHEN, J. (2022, 3 6). https://www.investopedia.com. Retrieved from www.investopedia.com: https://www.investopedia.com/terms/d/ddm.asp collective, c. (2021, 3 24). https://www.carboncollective.co. Retrieved from www.carboncollective.co: https://www.carboncollective.co/sustainable-investing/preferred-stock-valuation

Explain the difference between valuing for preferred stock and common stock and how to

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