Bedeker, Inc., has an issue of preferred stock outstanding that pays a $5.55 dividend every year in perpetuity. If this issue currently sells for $92 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.)

Question

Business

Jose Schneider

10 September, 11:31

Bedeker, Inc., has an issue of preferred stock outstanding that pays a $5.55 dividend every year in perpetuity. If this issue currently sells for $92 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.)

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Tatum · Answer 1

6.03%

Explanation:

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

Required rate of return = Annual preference dividend : expected sale price

= $5.55 : $92

= 6.03%

By dividing the annual preference dividend by the expected sale price we can get the required rate of return and the same is shown above

Hence, the required rate of return is 6.03%