Question

The preferred stock of Winter Coalition Floors is selling for $37 a share with a $1.1 quarterly payment. What is the firm's cost of preferred stock if the tax rate is 21 percent? (Express your answer in percentage and round it two decimal places, but do not include the percent sign, %, i.e., 4.65 for 4.65%)

Answer 1

Cost of preferred stock	=	Annual dividend	/	Current selling price
	=	$         4.4	/	$          37
	=	11.89%
Working:
Annual dividend	=	Quarterly dividend	*	4
	=	$         1.1	*	4
	=	$         4.4