Manic Corporation issued 400,000 preferred shares with a book value of $10 million three years ago.The preferred shares pay an annual dividend of $2.What is the required return if the current market value of these preferred shares is $9.5 million?

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The required return on preferred shares can be calculated using the formula: Required Return = Annual Dividend / Current Market Value. Here, the annual dividend is $2, and the current market value is $9.5 million for 400,000 shares, which means the market value per share is $9.5 million / 400,000 = $23.75. Plugging these values into the formula gives: Required Return = $2 / $23.75 = 0.0842 or 8.42%.

Manic Corporation Issued 400,000 Preferred Shares with a Book Value