A company recently issued 9% preferred stock. The preferred stock sold for P40 a share with a par of P20. The cost of issuing the stock was P5 a share. What is the company's cost of preferred stock? Group of answer choices 4.5% 10.3% 5.1% 9.0%

A company recently issued 9% preferred stock. The preferred stock sold for P40 a share with a par of P20. The cost of issuing the stock was P5 a share. What is the company's cost of preferred stock? Group of answer choices 4.5% 10.3% 5.1% 9.0%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company recently issued 9% preferred stock. The preferred stock sold for P40 a share with a par of P20. The cost of issuing the stock was P5 a share. What is the company's cost of preferred stock?

Group of answer choices

4.5%

10.3%

5.1%

9.0%

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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