Question: A $60 par value preferred stock has a stated dividend of 6%, with a market price of $70. The company plans on raising cash in

A $60 par value preferred stock has a stated dividend of 6%, with a market price of $70. The company plans on raising cash in the market by selling more of the same preferred stock and investment bankers charge the company 5% fee for selling it. The company’s stated tax rate is 25%.

A. Calculate the before tax cost of preferred stock to the company.

B. Calculate the cost of preferred stock to the company after taxes.

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