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Licemer1 [7]
3 years ago
6

A company recently issued 9% preferred stock. The preferred stock sold for $40 a share with a par of $20. The cost of issuing th

e stock was $5 a share. What is the company’s cost of preferred stock
Business
1 answer:
Westkost [7]3 years ago
5 0

Answer:

The company's cost of preferred stock is 5.1%

Explanation:

In order to find the cost  of the preferred stock we will need to divide the dividend the company pays on it by the net amount that the company is receiving for selling it.

In order to find the dividend we will multiply 9% by the par value of 20

Dividend = 0.09*20=1.8

Now we need to find the net amount the company receives for selling the preferred stock.

The company sells the stock for $40 but also has a issuing cost of $5, so in order to find the net amount we will subtract the cost from the price.

40-5= 35

35 is the net amount the company receives.

Now we will divide the the dividend 1.8 by the net amount 35

1.8/35=0.051

=5.1%

The company's cost of preferred stock is 5.1%

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A customer buys 100 shares of DEFF stock at $150 per share. During the first year of owning the stock, the customer receives $45
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Answer:

The total return on investment for the holding period is 10.5%.

Explanation:

If the consumer bought 100 shares for a value of $ 150, obtaining after a year $ 450 total for dividends and seeing his shares go to a value of $ 161.25, to obtain the total return on investment we must perform the following calculations:

On the one hand, we have a return of $ 450 in dividends, which were paid by the total set of 100 shares, with which each share paid $ 4.50 in that concept.

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(1,575 x 100) / 15,000 = X

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So, the rate of return on this investment is 10.5% of the starting value.

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