Medco Corporation can sell preferred stock for $112 with an estimated flotation cost of $5. It is anticipated the preferred stock will pay $10 per share in dividends.

a. Compute the cost of preferred stock for Medco Corp. (Input your answer as a percent rounded to 2 decimal places.)

NEXT QUESTION

Murray Motor Company wants you to calculate its cost of common stock. During the next 12 months, the company expects to pay dividends (D₁) of $3.80 per share, and the current price of its common stock is $78 per share. The expected growth rate is 8 percent.

a. Compute the cost of retained earnings (K_e). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

b. If a $6 flotation cost is involved, compute the cost of new common stock (K_n). (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)