Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / CTL Corporation has 30% of its financing in preferred shares

CTL Corporation has 30% of its financing in preferred shares

Finance

CTL Corporation has 30% of its financing in preferred shares. The shares are currently trading at a market price of $55. The book value of the shares is $60, and they pay a dividend of $4.05. CTL's corporate tax rate is 35%. What is the cost of preferred stock to the company?

Question 9 options:

7.36%

4.79%

4.39%

6.75%

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

Computation of the cost of preferred stock:-

Cost of preferred stock = Annual dividend / Current market price

= $4.05 / $55

= 7.36%

Correct option is 1). 7.36%