Question

Valuing Preferred stock Moraine, Inc., has an issue of preferred stock out- standing that pays a $3.50 dividend every year in perpetuity. if this issue currently sells for $85 per share, what is the required return?

Answer 1

4.12%

Step-by-step explanation:

Morraine incorporation pays a dividend of $3.50 every year

It currently sells at $85

Therefore the required return can be calculated as follows

= 3.50/85

= 0.0412 × 100

= 4.12%

Hence the required return is 4.12%