Fee Founders has perpetual preferred stock outstanding that sells for $196 a share and pays a dividend of $5 at the end of each year

Finance Dec 21, 2020

Fee Founders has perpetual preferred stock outstanding that sells for $196 a share and pays a dividend of $5 at the end of each year. What is the required rate of return?

Expert Solution

Required rate of return = Annual dividend / Current share price

Required rate of return = $5 / $196

Required rate of return = 2.55%

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