Preferred stock required rate of return

bb2000 · #1 Feb 9, 2008, 03:46 PM

Preferred stock pays $5.00 in annual dividends. Required rate of return is 13%. How much should one consider paying for one share?

morgaine300 · Feb 9, 2008, 10:23 PM

This is actually more of a math problem. This is actually asking, $5.00 is 13% OF what number? i.e. the original (bigger) number is what you would pay for the stock, and $5 is to be 13% of that.

The "original" number is your base. $5 is 13% of it. To solve for a base, divide by the percent.



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