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Monica [59]
3 years ago
15

A company’s investment bankers say that a proposed new issue of 7.5 percent cumulative preferred stock with a par value of $10 a

share can be sold to the public for $27 a share. The transaction costs will be $1 a share. What is the company’s cost of preferred stock financing?
Business
1 answer:
Nookie1986 [14]3 years ago
8 0

Answer:

The Answer is as follows;

Explanation:

Dividend on preferred stocks=$10*7.5%=$.075

Transaction Costs=$1

Total financing Cost=$1.75

Which is 17.5% (1.75/10)

The market price is not relevant for company's cost of financing. Therefore we have taken dividend payable on face value and transaction costs of issue for purpose of determination of financing cost.

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Quality improvement teams are groups of people from various work areas who define, analyze, and solve common production problems
pantera1 [17]

Answer: True

Explanation:

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4 0
3 years ago
The following information is from the December 31, 2017 balance sheet of Jackson Corporation
blsea [12.9K]

Answer:Average issue price = $105--b

Explanation:

Preferred stock , $100 par = $260,000

number of shares issued =Preferred stock / par value preferred stock= =$260,000 / $100 = 2,600 shares

Paid in capital in excess of par = total issued price - preferred stock

total issued value =  paid in capital in excess of par preferred stock + preferred stock = 14,000 + 260,000=$274,000

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7 0
3 years ago
Using payback to make capital investment decisions
Romashka-Z-Leto [24]

Answer: Henry should purchase this plant as it pays back in less than the 6 years it will have to be replaced in.

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Explanation:

Payback period is a capital budgeting strategy that shows how long it will take for cash inflow to pay off the original investment.

The formula is;

= Year before payback + Cashflow remaining till payback/ Cash inflow in year of Payback

Year before payback

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= 3.7 years

5 0
3 years ago
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