Whistle Corp. has a preferred stock that pays a dividend of $2.40. If you are willing to purchase the stock at $11, what is yo

Question

2 years ago

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Whistle Corp. has a preferred stock that pays a dividend of $2.40. If you are willing to purchase the stock at $11, what is yo

ur required rate of return? (Round your answer to the nearest .1% and assume that there are no transaction costs.)A.9.1%B.21.8%C.11.0%D.20.1%

Business

1 answer:

kiruha [24] · Answer 1 · 2022-05-26T07:11:37+03:00

Answer:

B. 21.8%

Explanation:

Cost of preference capital = $\frac{dividend}{price}\times100$

No adjustment of growth rate is done as the dividend on preference capital is constant and do not grow in normal conditions, that is it only differs in exceptional conditions.

therefore, in the given instance we have,

Dividend = $2.40

Current price = $11

Expected Return = $\frac{2.40}{11.00} \times 100$ = 21.8%

Thus correct option is

B. 21.8%

Whistle Corp. has a preferred stock that pays a dividend of​ $2.40. If you are willing to purchase the stock at​ $11, what is yo

Whistle Corp. has a preferred stock that pays a dividend of $2.40. If you are willing to purchase the stock at $11, what is yo