Ten years ago, the Edson Water Company issued preferred stock at a price equal to the par value of $100 If the dividend yield on that issue was 12 percent, explain why the firms current cost of preferred capital is not likely to equal 12 percent ...

Since the price of the preferred shares at issue was 100 and the dividend yield was 12 percent ...

Ten years ago, the Edson Water Company issued preferred stock at a price equal to the par

Question:

Ten years ago, the Edson Water Company issued preferred stock at a price equal to the of $100. If the yield on that issue was 12 percent, explain why the firm’s current cost of preferred capital is not likely to equal 12 percent.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... 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,...