Question

9-6 PREFERRED STOCK VALUATION Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return

Answer 1

Required rate of return = 8.33% Approx.

Step-by-step explanation:

Given:

Preferred stock outstanding = $60

Dividend = $5

Find:

Required rate of return

Computation:

Required rate of return = [D / P]100

Required rate of return = [5/60]100

Required rate of return = 8.33% Approx.