Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every...

Meteora, Inc., has an issue of preferred stock outstanding that pays a dividend of $4.35 every year, in perpetuity. This issue currently sells for $95 per share.

What is the required return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Expert Solution

Information provided:

Preferred dividend= $4.35

Current stock price= $95

The required rate of return is calculated using the below formula:

Required rate of return= Annual dividend/ Current stock price

= $4.35/ $95

= 0.0458*100

=4.5789%.

Therefore, the required rate of return is 4.58%.

In case of any further queries, kindly comment on the solution.

jeff jeffy answered 1 year ago

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