CFIN -STUDENT EDITION-TEXT
6th Edition
ISBN: 9781337407359
Author: BESLEY
Publisher: CENGAGE L
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Chapter 11, Problem 3PROB
Summary Introduction
Cost of preferred stock:
It is the cost to be incurred for issuing the preferred stock. Cost of preferred is the ratio of the preference dividend to price of the
Calculate the preferred stock as follows:
BC plans to issue to preferred stock with par $120 par value and preference
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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.
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XYZ Inc. is preparing to issue preferred stock. The preferred stock will have a P100 par value and will pay P8 per year in dividends. DRW’s marginal tax rate is 34%. Flotation costs for the new issue will be P2.38 per share. The issue price is expected to be P96.50 per share. Based on this information, DRW’s cost of preferred stock is nearest:
a. 5.3%
b. 8.5%
c. 5.6%
d. 8%
A firm has preferred stock that pays an 10 percent dividend on a $75 par value. If a new issue is offered, flotation costs will be 3 percent of the current market price of $80. The firm's marginal tax rate is 35 percent. What is the firm's cost of preferred stock financing?
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What Are Stock Buybacks and Why Are They Controversial?; Author: TD Ameritrade;https://www.youtube.com/watch?v=2O4bmcliaog;License: Standard youtube license