A few years ago, Hendersen Corp. issued preferred stock paying 8% of its par value of $50.

Question:

A few years ago, Hendersen Corp. issued preferred stock paying 8% of its par value of $50. The issue is currently selling for $38. Preferred stock flotation costs are 15% of the proceeds of the sale. What is Hendersen’s cost of preferred stock?

Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...