Costly Corporation is considering a new preferred stock issue The preferred would have a par value of $500 with an annual dividend equal to 16 0 of par The company believes that the market value of the stock would be $462 00 per share with flotation costs of $18 00 per share The firm 's marginal ta...

b 1732 Calculation of firms cost of preferred stock For ...

Costly Corporation is considering a new preferred stock issue. The preferred would have a par value of

Question:

Costly is considering a new preferred stock issue. The preferred would have a of $500 with an annual equal to 16.0% of par. The company believes that the market value of the stock would be $462.00 per share with flotation costs of $18.00 per share. The firm's marginal tax rate is 40%. What is the firm's cost of preferred stock?
a) 16.12%
b) 17.32%
c) 19.81%
d) 18.02%
e) 14.62%
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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,...