Question
Dixon Corp’s preferred stock does not mature (it is a “perpetual preferred”).  Each share of preferred stock pays a fixed dividend of $5.15 per year, and is currently selling for $62.  Estimate Dixon’s marginal cost of preferred equity.  Dixon faces a marginal tax rate of 30%.
   
10.10%
   
12.04%
   
5.81%
   
7.07%
   
8.31%

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