Question: Medco Corporation can sell preferred stock for $90 with an estimated flotation cost of $2. It is anticipated the preferred stock will pay $8 per

Medco Corporation can sell preferred stock for $90 with an estimated flotation cost of $2. It is anticipated the preferred stock will pay $8 per share in dividends.

a. compute the cost of preferred stock for Medco Corp.

b. Do we need to make a tax adjustment for the issuing firm?

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