Question

Razor Corporation's cost of preferred stock is 8%. The company's stock sells for $100 a share with selling costs are $5. What is the annual dividend to the preferred stock

Answer 1

Answer:

Razor Corporation

The annual dividend to the preferred stockholders is:

= $8 per share

Explanation:

a) Data and Calculations:

Cost of preferred stock = 8%

Selling price per preferred stock = $100

Annual dividend to the preferred stock = $100 * 8% = $8 per share

b) The $8 per share annual dividend of Razor's preferred stock dividend is computed by applying the fixed percentage to the preferred stock's total par value. In the above case, it is assumed that the par value or nominal value of the stock is $100.  The cost of selling or issuing the stock is not factored when calculating the dividend.