Your firm has preferred stock outstanding that pays a current dividend of $4.50

Question

Your firm has preferred stock outstanding that pays a current dividend of $4.50 per year and has a current price of $59.30. You anticipate that the economy will grow steadily at a rate of 2% per year for the foreseeable future. What is the market required rate of return on your firm's preferred stock? Answer                                                   
           7.59%                             
           7.74%                             
           9.74%                             
           There is not enough information to answer this question. Your firm has preferred stock outstanding that pays a current dividend of $4.50 per year and has a current price of $59.30. You anticipate that the economy will grow steadily at a rate of 2% per year for the foreseeable future. What is the market required rate of return on your firm's preferred stock? Your firm has preferred stock outstanding that pays a current dividend of $4.50 per year and has a current price of $59.30. You anticipate that the economy will grow steadily at a rate of 2% per year for the foreseeable future. What is the market required rate of return on your firm's preferred stock? 7.59% 7.74% 9.74% There is not enough information to answer this question.                             
           7.59%                             
           7.74%                             
           9.74%                             
           There is not enough information to answer this question.

Explanation / Answer

Hi,

Please find the answer as follows:

Rate of Return = 4.50*(1+.02)/59.30*100 = 7.74%

Thanks.

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