Question
Refer to Lancaster Engineering Inc. (LEI) information below, what is LEIs cost of preferred stock? (Note: Keep your answer. There are two other related questions.)
Refer to Lancaster Engineering Inc. (LEI) information below, what is LEIs cost of preferred stock? (Note: Keep your answer. There are two other related questions.)
Use the following information for the three questions referring to Lancaster Engineering Inc. (LEI):
Lancaster Engineering Inc. (LEI) has the following capital structure:
Debt 25%
Preferred stock 15%
Common Equity 60%
LEIs corporate income tax rate is 40%. Investors expect LEIs dividend to grow at a constant rate of 9% in the future. LEI has just paid a dividend of $3.60 per share (D0), and its common stock currently sells at a price of $54 per share. LEI can issue new preferred stock, with annual dividend of $11, at a price of $95 per share. LEI can also issue new corporate bond with yield to maturity, 12%.
A. | 11.58% | |
B. | 12.00% | |
C. | 11.00% | |
D. | 6.95% | |
E. | 15.00% |
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