Can you find the Value of Preferred Stock? Raya Inc. pays a dividend of $5.41 per year. It its required return was 11.95%, what would the preferred stock's value be? For preferred stock, use the dividend or expected dividend (the dividends do not grow in our preferred stock examples) and divide by the required rate of return The required rate of return on preferred stock is different than common stock even within the same firm because there are different risks involved in each type of holding - this is important in Chapter 10 Preferred stock is like a hybrid between common stock and debt The output of the preferred stock equation gives as estiamte in dollars of the value fo the stock In chapter 10, we will flip this equation around and solve for (r)