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irakobra [83]
3 years ago
8

Smiling Elephant, Inc., has an issue of preferred stock outstanding that pays a $5.90 dividend every year, in perpetuity. If thi

s issue currently sells for $80.55 per share, what is the required return
Business
1 answer:
igomit [66]3 years ago
4 0

Answer:

The required return is 7.32%

Explanation:

In order to calculate the required return we would have to calculate the following formula:

Required return= annual dividend/current price

According to the given we have the following:

annual dividend=$5.90 dividend

current price =$80.55 per share

Therefore, Required return=$5.90/$80.55

Required return=7.32%

The required return is 7.32%

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