Ask Question
17 June, 06:51

Aeryn Soon is a potential investor of Hippy Dippy Inc.'s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays an annual dividend of $40, and Aeryn's required return is 8 percent. Should she purchase this preferred stock or NOT? Why?

+3
Answers (1)
  1. 17 June, 09:18
    0
    Yes she should purchase this preferred stock.

    Explanation:

    Return on investment as a percentage = return/capital invested * 100

    For Aeryn to decide whether she should purchase this preferred stock, its return on investment should be higher than or equal to 8%. The return on investment of this preferred stock is $40/$475 * 100 = 8.42%, which is higher than her required return therefore she should purchase the preferred stock.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Aeryn Soon is a potential investor of Hippy Dippy Inc.'s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers