What is your estimate of the cost of preferred stock? SIVMED’s preferred stock is riskier to investors than its debt, yet the preferred stock’s before tax yield to investors is lower than the yield to maturity on the debt. Why does this occur?( Hint: Think about taxes) Find the following as well: Divident/P0 with no floatations and Divident/(P0 - flotation cost).  

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Cash and marketable securities Accounts receivable Inventory Current assets Net fixed assets Table 1 Silicon Valley Medical Technologies, Inc. Balance Sheet for the Year Ended December 31, 1999 (In Millions of Dollars) Total assets $ 7.6 39.6 9.1 $56.3 114.5 $170.8 Accounts payable Accruals Notes payable Current Liabilities Long-term debt Preferred stock Common stock Total claims $ 5.7 7.5 1.9 $15.1 61.2 15.0 79.5 $170.8 To begin, Owens reviewed SIVMED's 1999 balance sheet, which is shown in Table 1. Next, she assembled the following data: (1) SIVMED's long-term debt consists of 9.5 percent coupon, semiannual payment bonds with fifteen years remaining to maturity. The bonds last traded at a price of $891 per $1,000 par value bond. The bonds are not callable, and they are rated BBB. Cash and marketable securities Accounts receivable Inventory Current assets Net fixed assets Table 1 Silicon Valley Medical Technologies, Inc. Balance Sheet for the Year Ended December 31, 1999 (In Millions of Dollars) Total assets $ 7.6 39.6 9.1 $56.3 114.5 $170.8 Accounts payable Accruals Notes payable Current Liabilities Long-term debt Preferred stock Common stock Total claims $ 5.7 7.5 1.9 $15.1 61.2 15.0 79.5 $170.8 To begin, Owens reviewed SIVMED's 1999 balance sheet, which is shown in Table 1. Next, she assembled the following data: (1) SIVMED's long-term debt consists of 9.5 percent coupon, semiannual payment bonds with fifteen years remaining to maturity. The bonds last traded at a price of $891 per $1,000 par value bond. The bonds are not callable, and they are rated BBB.