A firm has an issue of preferred stock that pays an annual dividend of $2

Business Dec 10, 2020

A firm has an issue of preferred stock that pays an annual dividend of $2.00 per share and currently is selling for $18.50 per share. This firm's cost of financing with new preferred stock is:

A) 10%

B) 7.13%

C) 10.81%

D) 6.6%

Expert Solution

The answer is C) 10.81%

Explanation:

The annual dividend paid on preferred stock is $2.00
The selling price is $18.50 per share
The firm's cost of financing with new preferred stock is 10.81%

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