Preferred stock Par value Sale price Flotation cost Annual dividend A $ 100 $ 101 $ 9.00 11% B 40 38 $ 3.50 8% C 35 37 $ 4.00 $ 5.00 D 30 26 5% of par $ 3.00 E 20 20 $ 2.50 9% Stock B Par value $ 40 Sale price $ 38 Flotation cost $ 3.50 Annual dividend 8% Dividend payment Proceed from sale Cost of preferred stock By using cell references calculate the dividend payment of preferred Stock B. By using cell references calculate the proceeds from sale of referred stock B. By using cell references calculate the cost of preferred stock B.

Preferred stock Par value Sale price Flotation cost Annual dividend A $ 100 $ 101 $ 9.00 11% B 40 38 $ 3.50 8% C 35 37 $ 4.00 $ 5.00 D 30 26 5% of par $ 3.00 E 20 20 $ 2.50 9% Stock B Par value $ 40 Sale price $ 38 Flotation cost $ 3.50 Annual dividend 8% Dividend payment Proceed from sale Cost of preferred stock By using cell references calculate the dividend payment of preferred Stock B. By using cell references calculate the proceeds from sale of referred stock B. By using cell references calculate the cost of preferred stock B.

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 1EP

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Question

Preferred stock	Par value	Sale price	Flotation cost	Annual dividend
A	$ 100	$ 101	$ 9.00	11%
B	40	38	$ 3.50	8%
C	35	37	$ 4.00	$ 5.00
D	30	26	5% of par	$ 3.00
E	20	20	$ 2.50	9%

Stock B
Par value		$ 40
Sale price		$ 38
Flotation cost		$ 3.50
Annual dividend	8%
Dividend payment
Proceed from sale
Cost of preferred stock

By using cell references calculate the dividend payment of preferred Stock B.

By using cell references calculate the proceeds from sale of referred stock B.

By using cell references calculate the cost of preferred stock B.

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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