Molen Inc. has an outstanding issue of perpetual preferred stock with an annual dividend of $7.50 per share.

If the required return on this preferred stock is 6.5%, at what price should the stock sell?

Preferred stock price  is $115.38  

Explanation:

stock price =dividend/required rate of return

dividend is $7.50

required rate of return is 6.5%

stock price =$7.50/6.5%

stock price=$7.50/0.065

stock price=$ 115.38  

The most that a rational investor for the preferred stock of Molen Inc is $115.38 as that reflects the dividend earning capacity of the stock upon which investors base their pricing judgement .

Stock price = $115.38  

           Hope this helps! good luck :)

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