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Determine the cost for a preferred stock that pays annual dividend of $3
Determine the cost for a preferred stock that pays annual dividend of $3.25, has selling price $45.50, and incurs flotation costs of $1.05 per share.
Expert Solution
Cost of preferred stock = Dividend / (Selling price - floatation cost)
= 3.25/(45.50-1.05)
= 3.25/44.45
Cost of preferred stock = 7.3116%
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