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stranahan stranahan
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Posts: 3324
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2 years ago
Your firm has preferred stock outstanding that pays a current dividend of $3.00 per year and has a current price of $39.50. You anticipate that the economy will grow steadily at a rate of 3.00% per year for the foreseeable future. What is the market required rate of return on your firm's preferred stock?
A) 10.82%
B) 7.59%
C) 10.59%
D) There is not enough information to answer this question.
Textbook 

Financial Management: Core Concepts


Edition: 2nd
Author:
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FatherHyenaFatherHyena
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Posts: 235
2 years ago
Sign in or Sign up in seconds to unlock everything for free.
B -- R with subscript((ps)) = (dividend/net price) = ($3.00/$39.50) = 7.59%.
Note: the growth rate in the economy is a red herring and has no bearing on the answer
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Thanks Smiling Face with Open Mouth and Tightly-closed Eyes
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Thank you very much
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