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The cost of preferred stock Firms Chat carry preferred stock In their capital mix want to not only distribute dividends Co common stockholders but also maintain credibility in the capital markets so that they can raise additional funds in the future and avoid potential corporate raids from preferred stockholders. Consider the case of D&H Warehousing D&M Warehousing has preferred stock that pays a dividend of $7 per share and sells for $100 per share. It is considering issuing new shares of preferred stock. These new shares incur an underwriting (or flotation) cost of 2.5%