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30 July, 09:50

Fee Founders has perpetual preferred stock outstanding that sells for $60 a share and pays a dividend of $5 at the end of each year. What is the required rate of return?

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  1. 30 July, 09:59
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    8.33%

    Explanation:

    The required rate of return of the Preferred stock which the Fee Founders has shall be determined through following mentioned formula:

    r=d/p

    Applying the data from the given question in the above mentioned formula

    r=required rate of return=?

    d=dividend paid per share=$5

    p=price of preferred stock=$60

    r=5/60=8.33%=required rate of return
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