EcoTours, Inc.'s perpetual preferred stock currently trades at $98.50 per share, and it pays a $1.95...
EcoTours, Inc.'s perpetual preferred stock currently trades at $98.50 per share, and it pays a $1.95 quarterly dividend. If the company were to sell a new preferred issue, it would incur flotation costs of 6.00% of the issue price. What is EcoTours' cost of preferred stock? Note: Enter your answer rounded off to two decimal points. Do not enter % in the answer box. For example, if your answer is 0.13456 or 13.456% then enter as 13.46 in the answer box.
Homework Answers
Annual Dividend = $ 1.95 *4
= $ 7.80
Cost of Preferred Stock = Annual Dividend / [ Price * ( 1- Flotation cost)]
= $ 7.80 / [$ 98.50* ( 1-0.06)]
= 8.42%
Hence the correct answer is 8.42
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