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Red Melon has preferred stock that pays a dividend of $9.00 per share and sells for $100 per share. It is considering issuing new shares
Red Melon has preferred stock that pays a dividend of $9.00 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 2.70%.
How much will Red Melon pay to the underwriter on a per-share basis?
$2.30
$2.70
$87.57
$2.97
After it pays its underwriter, how much will Red Melon receive from each share of preferred stock that it issues?
$97.30
$87.57
$2.30
$2.70
$2.97
Based on this information, Red Melon's cost of preferred stock is
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