Question

Libby has bought 100 preferred stocks of Alexis Ltd. This year, Alexis Ltd. paid a dividend of $2.50 per share. The price of each preferred share is $15. What is the cost of preferred equity?

The cost of preferred equity is [blank]
percent.

Answer 1

$0,16

Step-by-step explanation:

Cost of Preferred Stock. is the rate of return required by holders of a company's preferred stock. It is calculated by dividing the annual preferred dividend payment by the preferred stock's current market price

Dividend $100 x $2,50= $250

___________________________________________ = $0,16

Current market price $100 x $15= $1,500

Answer 2

17.00 percent

Step-by-step explanation:

Preferred equity is an ownership interest in a company. However, preferred does not carry any voting right like the common equity.

The formula for calculating the cost of preferred equity for the 100 preferred stocks is follows:

`Cost of Preferred Equity = (Preferred Dividend per Share * 100)/(Price per Share * 100)`

Where,

Preferred Dividend Per Share = $2.50

Price Per Share = $15

Therefore,

`Cost of Preferred Equity = (2.50 * 100)/(15) = (250)/(1,500) = 0.17`

Expressing 0.17 as a percentage by multiplying it by 100, we have:

Cost of Preferred Equity = 0.17 * 100 = 17.00 or 17.00 percent.

I wish best of luck.