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Bostwick Companys perpetual preferred stock sells for $85 per share, and it pays an $8.10 annual dividend. If the company we
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Answer #1

The cost of preferred stock is computed as shown below:

= Annual dividend / [ ( selling price of stock (1 - flotation cost) ]

= $ 8.10 / [ ($ 85 x (1 - 0.04) ]

= $ 8.10 / $ 81.6

= 9.93% Approximately

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