Question

The Dry Well has 6.85 percent preferred stock outstanding with a market value per share of...

The Dry Well has 6.85 percent preferred stock outstanding with a market value per share of $79, a stated value of $100 per share. What is the cost of preferred stock?

=8.67%

Please check the answers and show all work typed out. No excel or grid style please as I am on mobile.

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Answer #1

We know that cost of preferred stock = annual dividend / Current price

Preferred dividend = 6.85%*100 = 6.85

Current market price = 79

Therefore cost of preferred stock = 6.85/79 = 8.67%.

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