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A firm has a 5% dividend preferred stock with a par value of $25 issued and...

A firm has a 5% dividend preferred stock with a par value of $25 issued and outstanding. The stock is selling for $22 in the market today. The flotation costs of new preferreds are $1. If the firm is to issue new preferred shares at par to fund a portion of its new capital expenditures, what is the component cost of preferred stock for the company?

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Cost of preferred stock (Rp) Annual dividend: (Stock price-Flotation cost) $ Here, Annual dividend Preferred stock price Flot

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