Question
3. A company has preferred stock that can be sold for $27 per share. The preferred stock pays an annual dividend of $3.50 based on
3. A company has preferred stock that can be sold for $27 per share. The preferred stock pays an annual dividend of $3.50 based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.30 per share. Therefore, the cost of preferred stock is ______________. (Show your work.)
4. Luke A. Manufacturing paid a dividend yesterday of $5 per share (D0 = $5). The dividend is expected to grow at a constant rate of 7% per year. The price of Luke A. Manufacturing's stock today is $22 per share. If Luke A. Manufacturing decides to issue new common stock, flotation costs will equal $2.50 per share. Based on the above information, the cost of new common stock is __________. (Show your work.)
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