Your Firm Has Preferred Stock Outstanding That Pays a Current

question 30

Multiple Choice

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)10.59%
• C)7.59%
• D)There is not enough information to answer this question.

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Definitions:

Marginal Revenue

Increment in income from the sale of one more product or service unit.

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, often indicating the degree of profitability.

Marginal Decision Rule

A principle stating that an action should be taken if and only if the marginal benefits exceed the marginal costs.

ATC

Average Total Cost, which represents the total cost per unit of output, calculated by dividing the total cost by the quantity of output produced.