Question: The preferred stock of Gator Industries sells for 35 and
The preferred stock of Gator Industries sells for $35 and pays $2.75 per year in dividends. What is the cost of preferred stock financing? If Gator were to issue 500,000 more preferred shares just like the ones it currently has outstanding, it could sell them for $35 a share but would incur flotation costs of $3 per share. What are the flotation costs for issuing the preferred shares, and how should these costs be incorporated into the NPV of the project being financed?
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