Morristown Industries Has an Issue of Preferred Stock Outstanding That

question 102

Multiple Choice

Morristown Industries has an issue of preferred stock outstanding that pays a $12.60 dividend every year in perpetuity.What is the required return if this issue currently sells for $80 per share?

• A)15.75 percent
• B)16.72 percent
• C)16.80 percent
• D)16.86 percent
• E)16.95 percent

---

Definitions:

Authorized

This term indicates that permission has been given by a relevant authority or person allowing specific actions or activities.

Treasury Stock

Shares that were once issued and outstanding but were subsequently reacquired by the issuing company and are held in the company’s treasury.

Outstanding

Something that is exceptionally good or remaining unpaid or unresolved.

Indenture

A formal legal agreement, contract, or document, especially one regarding debt or bonds, specifying terms and conditions.