Answer:
the cost of the preferred stock of the firm is 0.1548 or 15.48%
Explanation:
The computation of the cost of the preferred stock of the firm is shown below:
But before that the preference dividend is
= $100 × 6.5%
= $6.50
Now the cost of the preferred stock is
= Dividend ÷ current price of the preferred stock
= $6.50 ÷ $42
= 0.1548 OR 15.48%
hence, the cost of the preferred stock of the firm is 0.1548 or 15.48%
