CFIN
5th Edition
ISBN: 9781305661639
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 11, Problem 4PROB
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:
JJ plans to issue preferred stock with current market value of $50 and preference dividend $4.75. Flotation cost is given is 5% and number of shares issued is 10,000.
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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?
Barton Industries can issue perpetual preferred stock at a price of $44 per share. The stock would pay a constant annual dividend of $3.20 per share. If the firm's marginal tax rate is 25%, what is the company's cost of preferred stock? Round your answer to two decimal places.
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