88.8k views
10 votes
102M in preferred stock, $85M in book value of common stock, and $120M in debt selling at 96.7%. The common stock has a market to book ratio of 1.75, a yield to maturity on its debt of 5.4%, and a return on its preferred stock of 9.45%. The company is sitting in the 18% tax bracket, has a beta of 1.25 on its common stock, the market return is 15% and the risk free rate is 3.24%. What is the Cost of Preferred Stock

User Bairog
by
8.3k points

1 Answer

6 votes

Answer:

9.45%

Step-by-step explanation:

the cost of preferred stock is given by the question.

the formula that we can use to calculate the cost of preferred stock = preferred dividends / market price per preferred stock

remember that preferred dividends are paid with after tax earnings, so they do not reduce taxes

User Yasin Yousif
by
8.0k points

Related questions

1 answer
4 votes
77.2k views
asked May 19, 2024 132k views
SaleCar asked May 19, 2024
by SaleCar
7.6k points
1 answer
5 votes
132k views