If a company has 20,000 shares of 5% preferred stock outstanding, selling for $72 per share,...
If a company has 20,000 shares of 5% preferred stock outstanding, selling for $72 per share, what is the cost of preferred stock?
A- 5.40%
B- 6.20%
C- 7.18%
D- 4.73%
E- 6.94%
Please show the calculation steps so I can understand. Thank you!
Homework Answers
Assuming face value to be $100
Annual dividend = 0.05 * 100 = 5
Cost of preferred stock = (Annual dividend / share price) * 100
Cost of preferred stock = (5 / 72) * 100
Cost of preferred stock = 6.94%
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