Your firm has preferred stock outstanding that pays a current dividend of $2.50 per year and has a current price of $25.00.Currently,preferred stock makes up approximately 5% of your firm's long-term financing.What is the market required rate of return on your firm's preferred stock?

Question

Quizplus · Accepted Answer

The market required rate of return on the firm's preferred stock can be calculated using the formula: dividend per share / price per share. So, $2.50 / $25.00 = 0.10 or 10%.

Your Firm Has Preferred Stock Outstanding That Pays a Current