Buoyant Cruises plans to issue preferred stock with a $120 par value and a 5 percent dividend.

Question:

Buoyant Cruises plans to issue preferred stock with a $120 par value and a 5 percent dividend. Even though the current market value of its preferred stock is $80 per share, Buoyant expects to net only $75 for each share issued. What is its cost of issuing preferred stock? The firm’s marginal tax rate is 34 percent.

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,...

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