Question

Your firm has preferred stock outstanding that pays a current dividend of $2.00 per year and has a current price of $21.50. Currently, preferred stock makes up approximately 15% of your firm's long-term financing. What is the market required rate of return on your firm's preferred stock

Answer 1

Required return will be equal to 9.30%

Step-by-step explanation:

We have given current dividend of the year = $2.00 per year

Current price = $21.50

We have to find the market required return

Required return is equal to ratio of current dividend and current price

Required return

`=(2)/(21.50)=0.0930` = 9.30 %

So required return will be equal to 9.30 %