contestada

Bosio Inc.'s perpetual preferred stock sells for $97.50 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC

Respuesta :

Answer:

The company's cost of preferred stock is 9.08%

Explanation:

To calculate the cost of preferred stock we would use the following formula:

cost of preferred stock =          dividend        

                                          Price×(1-Flotation)

According to the details of the letter, the dividend is $8.50, the price is $97.50 per share and the flotation is 4.00%

So, cost of preferred stock =     $8.50      

                                               $97.50×(1-4%)

                                            =       $8.50      

                                                    $93.6

                                            = 9.08%. Cost of preferred stock.      

Otras preguntas