Jumbo Juices preferred stock pays a constant dividend equal to $4.75 per share. The firms marginal tax

Question:

Jumbo Juice’s preferred stock pays a constant dividend equal to $4.75 per share. The firm’s marginal tax rate is 40 percent. Jumbo Juice incurs a 5 percent flotation cost each time it issues preferred stock.

(a) If the firm issues 10,000 shares of preferred stock at $50 per share, how much of the total value of the issue will the firm be able to use (receive)?

(b) What is Jumbo Juice’s cost of preferred stock?

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...

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