(cost of preferred stock, w/flotation) A company plans to pay an annual perpetual dividend of $2.00...
(cost of preferred stock, w/flotation) A company plans to pay an annual perpetual dividend of $2.00 on its newly issued preferred stock that is current valued at $45. If it faces a 5% flotation cost on this issue, what is its after-tax cost of preferred stock?
Homework Answers
cost of preferred stock=Annual dividend/Current value(1-Flotation cost)
=2/(45*(1-0.05))
=2/42.75
=4.68%(Approx).
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