A firm plans to issue new shares of preferred stock to fund a new project. The new
Fantastic news! We've Found the answer you've been seeking!
Question:
A firm plans to issue new shares of preferred stock to fund a new project. The new preferred stock shares will offer an annual dividend of $6 and will be sold to investors at a price of $100.
The firm's investment bankers will help them do this, but will charge them 6% of the proceeds. This means for every $100 share that is sold, the bankers will take $4, and the firm will receive $96.
Taking the flotation costs into account, what will be the required return on preferred stock, rPS?
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
Posted Date: