3. 3: The Cost of Capital: Cost of Preferred Honest / 1 Cost of Preferred Stock The cost of preferred stock, Tp, used in the weighted average cost of capital equation is calculated as the preferred dividend, ved by the price of the preferred stock, Pp. A tax adjustment is made when calculating ro because preferred dividends Select tax savings are associated with preferred stock. V Quantitative Problem: Barton Industries can issue perpetual preferred stock at a price of 556 per share. The stock would pay attente of $3.72 per share. If the firm's marginal tax rate is 25%, what is the company's cost of preferred stock? Round your answer to his decina pa. 6.64 %