Question

Voltanis Corp. has preferred stock outstanding that will pay an annual dividend of $2.85 every year in perpetuity. If the stock currently sells for $92.87 per share, what is the required return?

Answer 1

Answer:

3.07%

Explanation:

Required return is a financial term that describes the least return an individual or investor hopes to obtain by investing in a particular project. This can be derived by dividing expected annual dividend of stock with current rate of stocks, then multiply by 100

Hence, in this case, the expected annual dividend of stock is $2.85

The current rate of stock per share is $92.87

Therefore, the required return is $2.85/$92.87 = 0.0307 * 100

=> 3.07%

Hence, the final answer is 3.07%.