a.Cost of the Preferred Stock
Par Value=$100
Annual dividend=8%*100=$8.00
Selling Price =$99.50
Flotation cost =$1.50
Net Cash received per share=99.50-1.50=$98
Cost of the Preferred Stock=8/98=0.0816
Cost of the preferred stock=8.16%
b.
Annual dividend=10%*100=$10..00
Selling Price (Net)=$90.00
Net Cash received per share=$90.00
Cost of the Preferred Stock=10/90=0.1111
Cost of the preferred stock=11.11%
Data on common stock and dividend growth rates are not available.
Hence, c and d cannot be answered
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