Brown's Founders has preferred stock outstanding which pays a dividend of $5 at the end of each year. The preferred stock sells for $60 a share. What is the preferred stock's required rate of return? Select one: a.Kps=12.30% b.kps= 4.65% c.Kps=15.50% d.Kps=8.33%

Brown's Founders has preferred stock outstanding which pays a dividend of $5 at the end of each year. The preferred stock sells for $60 a share. What is the preferred stock's required rate of return? Select one: a.Kps=12.30% b.kps= 4.65% c.Kps=15.50% d.Kps=8.33%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Answer the multiple-choice question below:

1. Brown's Founders has preferred stock outstanding which pays a dividend of $5 at the end of each year. The preferred stock sells for $60 a share. What is the preferred stock's required rate of return?

Select one:

a.K_ps=12.30%

b.k_ps= 4.65%

c.K_ps=15.50%

d.K_p_s=8.33%

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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