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22 January, 21:14

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.90 dividend every year, in perpetuity. If this issue currently sells for $80.55 per share, what is the required return

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  1. 22 January, 21:17
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    The required return is 7.32%

    Explanation:

    In order to calculate the required return we would have to calculate the following formula:

    Required return = annual dividend/current price

    According to the given we have the following:

    annual dividend=$5.90 dividend

    current price = $80.55 per share

    Therefore, Required return=$5.90/$80.55

    Required return=7.32%

    The required return is 7.32%
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