Rascal Inc has an issue of preferred stock outstanding that

Rascal, Inc., has an issue of preferred stock outstanding that pays a $7.5 dividend every year in perpetuity. If this issue currently sells for $94.51 per share, the required return is ___________ percent. Express in percentage without the % sign, and round it to two decimal places, e.g., 13.45.

Solution

required return=Annual dividend/Current price

=(7.5/94.51)

which is equal to

=7.94(Approx).