A companys perpetual preferred stock currently trades at $80 per share and pays a $6 00 annual dividend per share If the company were to sell a new preferred issue, it would incur a flotation cost of 4 What would the cost of that capital be 7 51 7 81 7 99 8 36 8 62 ...

781 Computation of the Cost of ...

A companys perpetual preferred stock currently trades at $80 per share and pays a $6.00 annual dividend

Question:

A company’s perpetual preferred stock currently trades at $80 per share and pays a $6.00 annual per share. If the company were to sell a new preferred issue, it would incur a flotation cost of 4%. What would the cost of that capital be?
7.51%
7.81%
7.99%
8.36%
8.62%

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...