Question

Question completion Status: Question 19 (Take a note of the information of your calculation because you need the information for the last question Debt 20 bonds with 8 % coupon rate, payable annually, 51.000 par value, 15 years to maturity, selling at $970 per bond. Common Stock 500 shares of common stock outstanding. The stock sells for a price of $112 per share and has a beta of 1.6 Preferred Stock 110 preferred shares outstanding, currently trading at $120 per share with an annual dividend payment of 57 Market The market risk premium is 996 and the risk free rate is 2% Tax Rate 2196 What is the cost of preferred equity? (You may not need all the information from above to answer this question) D.(179) Cost of common equity: K,- Pes + 9 Return or Cost of common equity: E() = r +B[EGM) - ] Cost of Preferred Stock: Pp. Dp Value of Preferred Stock WACC = W. *Ku(1 - T') + W... Kes + Wps * Ky 5.83 %

Answer 1

Cost of Preferred Equity

Cost of Preferred Equity = (Annual Preferred dividend per share / Selling price per share) x 100

Cost of Preferred Equity = ($7.00 / $120.00) x 100

Cost of Preferred Equity = 5.83%

Hence, the Cost of Preferred Equity is 5.83%