1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Wewaii [24]
3 years ago
8

A firm has issued 10 percent preferred​ stock, which sold for​ $100 per share par value. The cost of issuing and selling the sto

ck was​ $2 per share. The​ firm's marginal tax rate is 40 percent. The cost of the preferred stock is​
Business
1 answer:
rusak2 [61]3 years ago
8 0

Answer:

The cost of preferred stock is 10.2%

Explanation:

The actual amount realized from issuing the preferred of $100 per share par value is the par value less cost of issuing and selling stock of $2 per share, in other words,$98($100-$2) was realized per share from the issuance.

Having known the net amount realized, the cost of preferred stock can be calculated as follows:

cost of preferred stock =return on preferred stock/net amount realized

return is 10% of $100(par value), i.e $10 per share

cost of preferred stock =$10/$98=10.2%

Note that preferred is not tax deductible like debt financing , hence the rate of tax given is not considered in determining the cost of preferred stock.

You might be interested in
Qs 14-2 fixed and variable costs lo c2 a cell phone company offers two different plans. plan a costs $80 per month for unlimited
Arlecino [84]

Plan A: Post paid plan

Total cost A = $80 per month

 

Plan B: Pre paid plan

Total cost B = $0.20 per minute * 1,700 minutes + $0.10 per text message * 1,600 texts

Total cost B = $340 + $160

Total cost B = $500 per month

 

<span>Therefore it is better to get the post paid plan, plan A.</span>

3 0
3 years ago
Many mining and mineral extraction processes tend to exhibit increasing returns to scale. Suppose copper mines have increasing r
IrinaK [193]

Answer: D) Output decreases by more than 25 percent

Explanation:

When a firm is said to be experiencing Increasing Returns to Scale, it means that for every additional unit of a factor of production, the firm experiences a higher increase in production than the additional unit. For example, if a Firm's output increases by 1.5 every time they hire an extra worker, the firm is said to be going through Increasing Returns to Scale.

With that same logic, if factors of production were reduced, the company undergoes a reduction in output that is bigger than the reduction in the factor of production.

For this reason, option D is correct in saying that Output decreases by more than 25 percent.

6 0
3 years ago
Orange County Shop follows the revenue recognition principle. Orange County services a bicycle on July 31. The customer picks up
sp2606 [1]

The correct answer is A) July 31st.

Orange County shows that the revenue was recognized on July 31st.

The other options of the question were B) August 1. C) August 5. D) August 6.

To be successful, a business needs good control and operation systems. Accounting is of the utmost importance when controlling the finances of a company. You have to keep your records straight. Your accountant needs to clearly understand when to record revenue in your book. So the accountant has to understand the general principles of accounting. According to the revenue recognition principle, revenue has to be recognized when they are realized, so you keep it in the book.

4 0
3 years ago
Why is keystone so bad
Vaselesa [24]

Answer:

Keystone XL would be bad for wildlife, especially endangered species. Also without Keystone XL, the same amount of bitumen will be produced and the U.S. will still get all of it through the other pipeline projects. Keystone is not needed!

Explanation:

3 0
3 years ago
Carlos is a hard-working college senior. One Saturday, he decides to work nonstop until he has answered 100 practice problems fo
SVETLANKA909090 [29]
The answer is D because 4 hours working on problems are 0 hours of reading
3 0
3 years ago
Other questions:
  • Select all that apply.
    5·1 answer
  • The marginal revenue product of capital is _______.
    10·1 answer
  • Preadvertised products that are not actually on the market yet and may not even exist are referred to as _____. A. substitute pr
    6·1 answer
  • Bloom Company management predicts that it will incur fixed costs of $259,000 and earn pretax income of $493,100 in the next peri
    6·1 answer
  • PLEASE HELP ASAP!!! (There are 5 questions)
    14·1 answer
  • LPD​ Logistics, Inc.'s projected sales for the first six months of 2010 are given below. Jan. ​$300,000 April ​$350,000 Feb. ​$3
    6·1 answer
  • A smart fraudster usually manipulates which financial record in order to better avoid an audit trail? Group of answer choices In
    6·1 answer
  • Why are cigarettes sold in gas stations when smoking is prohibited there?
    10·2 answers
  • Stopping to take notes makes it harder to remember the details of something you’ve read.
    10·2 answers
  • Why were trade unions established​
    8·2 answers
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!