Question

Bedeker, Inc., has an issue of preferred stock outstanding that pays a $4.95 dividend every year in perpetuity. If this issue currently sells for $94 per share, what is the required return

Answer 1

Required return = 5.27%

Step-by-step explanation:

Below is the calculation of required return:

Given the dividend paid amount = $4.95

The selling price of share = $94

Use below formula to find the required return:

Required return = Dividend amount / Selling price

Now plug the values:

Required return = $4.95 / 94

Required return = 5.27%