A few years ago, Hendersen Corp. issued preferred stock paying 8% of its par value of...
A few years ago, Hendersen Corp. issued preferred stock paying 8% of its par value of $46. The issue is currently selling for $36. Preferred stock flotation costs are 10% of the proceeds of the sale. What is Hendersen's cost of preferred stock? Round the answer to two decimal places.
Homework Answers
Annual dividend=46*8%=$3.68
Hence cost of preferred stock=Annual dividend/Current price*(1-Flotation cost)
=3.68/(36*(1-0.1))
=3.68/32.4
=11.36%(Approx).
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A few years ago, Hendersen Corp. issued preferred stock paying
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