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A company's perpetual preferred stock currently sells for $92.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock?a. 7.81%b. 8.22%c. 8.65%d. 9.10%e. 9.56%

Respuesta :

Answer:

d. 9.10%

Explanation:

Cost of Preferred Stock

= Dividend / Price net of flotation costs

= Price net of flotation costs = (92.50 - (92.50 * 5%))  = 87.88

= 8/87.88

= 9.10%

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