Question

Dewyco has preference stock trading at $50 per share. The next preference dividend of $4 is due in one year. What is Dewycos cost of capital for preference share? O a. The cost for Dewycos preference share is 9% per annum. O b. The cost for Dewcos preference share is 20% per annum O c. The cost for Dewycos preference share is 12.5% per annum. d. The cost for Dewycos preference share is 8% per annum

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Answer #1

d. The cost of Dewyco's preference share is 8% per annum ,

Cost of preferred share = Dividend / market price of share

   = $4 / $50

   = 8%

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