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22 December, 10:55

Bedeker, Inc., has an issue of preferred stock outstanding that pays a $4.75 dividend every year in perpetuity. If this issue currently sells for $98 per share, what is the required return

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  1. 22 December, 14:06
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    4.85%

    Explanation:

    The computation of the required return is shown below:

    Data provided in the question

    Dividend for preference stock = $4.75

    And, the current selling price of the stock is $98

    So, the required return is

    = Dividend for preference stock : current selling price of the stock

    = $4.75 : $98

    = 4.85%

    We simply applied the above formula to determine the required return
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