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3
3. Rocky Mountain Travel Incorporated plans to issue preferred stock at a price of $50 per share. The dividend will be $430 per share, and issuance costs are expected to be $3.00 per share. What is the cost to Rocky Mountain Travel of raising funds with preferred stock?
Expert Solution
Given,
Price of preferred stock= $50
Price of dividend= $4.30
Issuance of cost= $3
So,
Cost = 4.30/ (50* (1- 3/ 50))
= 9.15%
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