Buoyant Cruises plans to issue preferred stock with a $110 par value and a 6 percent dividend.  Even though the current market value of its preferred stock is $80 per share, Buoyant expects to net only $75 for each share issued. What is its cost of issuing preferred stock? The firm's marginal tax rate is 34 percent.   Show work please.

EBK CFIN
6th Edition
ISBN:9781337671743
Author:BESLEY
Publisher:BESLEY
Chapter11: The Cost Of Capital
Section: Chapter Questions
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Buoyant Cruises plans to issue preferred stock with a $110 par value and a 6 percent dividend.  Even though the current market value of its preferred stock is $80 per share, Buoyant expects to net only $75 for each share issued. What is its cost of issuing preferred stock? The firm's marginal tax rate is 34 percent.

 

Show work please.

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