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A firm has an issue of preferred stock outstanding that pays a $5 dividend every year, in perpetuity. if this issue currently sells for $84.12 per share, what is the required return?

Respuesta :

The required return is $5.94%

How do we find the Required return?

 The per-share value is thus given by

[tex]P_{0}[/tex] =[tex]\frac{D}{R}[/tex]

where R is the required return

Given that,

preferred stock = $5

currently sells = $84.12 per share

To find the required return,

R= [tex]\frac{D}{p_{0} } }[/tex]

R=$5 / $84.12

R= .0594 = 5.94%

We can determine a value for the stock under a few very helpful special circumstances. What we need to do is make some generalizations about the dividend growth rate, or the pattern of future dividends.

To learn more about Required returns, refer

to https://brainly.com/question/25922327

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