The issue of preferred shares has a cost of $ 5 per share and will pay a dividend of 10% of its value of $ 110 per preferred share

Finance Dec 26, 2020

The issue of preferred shares has a cost of $ 5 per share and will pay a dividend of 10% of its value of $ 110 per preferred share. Calculate the cost of preferred equity

Expert Solution

Cost of preferred equity = Annual dividend / Net Proceeds

Cost of preferred equity = ($110 * 0.10) / ($110 - $5)

Cost of preferred equity = 0.1048 or 10.48%

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