Question

Voltanis Corp. has preferred stock outstanding that will pay an annual dividend of $3.81 every year in perpetuity. If the stock currently sells for $98.31 per share, what is the required return

Answer 1

3.9%

Step-by-step explanation:

Annual dividend = $3.81

Current stock = $98.31 per share

Required return is the return on the investment which has been made by the shareholders of the company.

The Required return is calculated by the using the formula below:

Expected dividend per share divided by the Price per share

= 3.81 divided by 98.31

= 0.03875 x 100

= 3.9% after rounding up