Question

Ningbo Shipping has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. The cost of Ningbo Shipping preferred stock is:

Answer 1

Answer:

The cost of Ningbo Shipping Preferred stock is 12.40%

Step-by-step explanation:

In this question, we are asked to calculate the cost of Ningbo shipping Preferred stock.

To calculate this, we make use of the following mathematical relation;

The cost preferred stock Kp = Annual dividends/ Issued price-Cost of Issuing

From the question, we identify the following;

Issued price = $125

Annual dividend = $15

Cost of Issuing = $4

Inserting these into the formula we have;

Kp = $15/$125 - $4 = 12.40%

This means that Cost of Ningbo shipping preferred stock is 12.40%