A company's preferred stock pays an annual dividend of 7 euros per share. When issued, the shares sold for their par value of 100 euros per share. What is the cost of preferred stock if the current price is 120 euros per share? 5.3% 5.8% 8.1% 9.6% None of the above

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 3PROB
icon
Related questions
Question

A company's preferred stock pays an annual dividend of 7 euros per share. When issued, the shares sold for their par value of 100 euros per share. What is the cost of preferred stock if the current price is 120 euros per share?

    1. 5.3%

    2. 5.8%

    3. 8.1%

    4. 9.6%

    5. None of the above.

Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
EBK CFIN
EBK CFIN
Finance
ISBN:
9781337671743
Author:
BESLEY
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Financial Accounting Intro Concepts Meth/Uses
Financial Accounting Intro Concepts Meth/Uses
Finance
ISBN:
9781285595047
Author:
Weil
Publisher:
Cengage
EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Personal Finance
Personal Finance
Finance
ISBN:
9781337669214
Author:
GARMAN
Publisher:
Cengage
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning