Answer: $31.25

The intrinsic value (Vo) of a non-callable, non-convertible preferred stock is calculated using the formula: \[ Vo = \frac{D_o}{r} \] where: - \( D_o \) is the annual dividend, calculated as the par value multiplied by the dividend rate: \( D_o = 25 \times 0.05 = 1.25 \). - \( r \) is the required rate of return: 4% or 0.04. Substituting the values: \[ Vo = \frac{1.25}{0.04} = 31.25 \] Thus, the intrinsic value is closest to **$31.25** (Option C). **Incorrect Options:** - **A ($25.25):** Incorrectly adds the difference between the dividend rate and required return to the par value. - **B ($26.00):** Incorrectly multiplies the par value by the required return.

Author: LeetQuiz Editorial Team