Burnwood Tech plans to issue some $50 par preferred stock with a 8% dividend. A similar stock is selling on the market for $65. Burnwood must pay flotation costs of 6% of the issue price. What is the cost of the preferred stock? Round your answer to two decimal places.
1 answer:
Answer:
6.5%
Step-by-step explanation:
The formular used to calculate the cost of preferred stock is:
= Fixed dividend/Net proceeds
Fixed dividend= $50 × 8/100
= $50×0.08
=$4
Net proceeds= Market price-Flotation costs
= $65-(6/100×$65)
= $65-(0.06×$65)
= $65-3.9
= $61.1
Therefore cost of preferred stock is
= 4/61.1 ×100
= 0.065×100
= 6.5%
Hence the cost of preferred stock is 6.5%
You might be interested in
If you are cooking or in a lab and you are using measurements and you need to cut the recipe or compounds in half or double it you need to know how to do so
I was thinking that the answer could be
Answer:
I dont understand your question rither
Step-by-step explanation:
sorry I would help is I neew
Answer:
x = -5/2
Step-by-step explanation:
Answer:
1.63
HOPE THIS WILL HELP..............!
