Answer:
[tex]k_{p}[/tex] = 3.72%
Explanation:
We know,
The price of a preferred stock is calculated by dividing the dividends from preferred stock by the required rate of return of preference share. Assuming the stock is growing constantly.
The formula to calculate -
Price of preferred stock = Dividend from preferred stock ÷ required rate of return
Given,
Dividend from preferred stock = $3.35
Price of preferred stock = $90
Therefore,
$90 = $3.35 ÷ [tex]k_{p}[/tex]
or, [tex]k_{p}[/tex] = $3.35 ÷ $90
or, [tex]k_{p}[/tex] = 0.0372
Hence, [tex]k_{p}[/tex] = 3.72%
The required return = 3.72%
