Your employer pays a $1.00 dividend on its preferred shares.If the price of its preferred shares are $25 and floatation costs would be .50 per share,what is the required rate of return on the firm's preferred shares?

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Quizplus · Accepted Answer

The required rate of return on the firm's preferred shares is 4.08%. This is calculated by dividing the dividend by the price of the preferred shares, minus the floatation costs. In this case, the dividend is $1.00, the price of the preferred shares is $25, and the floatation costs are $0.50. So, the required rate of return is ($1.00 / $25) - $0.50 = 4.08%.

Your Employer Pays a $1