A company's perpetual preferred stock currently sells for $102.50 per share, and it pays an $8.00 annual dividend. If the issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock? a. 9.28% b. 8.22% c. 9.53% d. 6.90% e. 7.97%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A company's perpetual preferred stock currently sells for $102.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred
issue, it would incur a flotation cost of 5.0o% of the issue price. What is the firm's cost of preferred stock?
A
a. 9.28%
b. 8.22%
c. 9.53%
O d. 6.90%
e. 7.97%
Transcribed Image Text:A company's perpetual preferred stock currently sells for $102.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.0o% of the issue price. What is the firm's cost of preferred stock? A a. 9.28% b. 8.22% c. 9.53% O d. 6.90% e. 7.97%
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