Question

Bedekar, Inc., has an issue of preferred stock outstanding that pays a $3.40 dividend every year in perpetuity. If this issue currently sells for $91 per share, what is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Answer 1

3.74%

Step-by-step explanation:

The computation of the required rate of return is shown below:

= (Annual dividend paid ÷ Current selling price of preferred stock)× 100

= ($3.40 ÷ $91) × 100

= 3.74%

Simply we divide the annual dividend paid by the Current selling price of preferred stock so that the accurate required rate of return can come.