Question

Giant has preferred stock selling for 1237 percent of par that pays a 13 percent annual coupon. What would be Giant's comparent cost of

preferred stock?
Multiple Choice
a. 11.30%
b. 13.98%
c. 9.14%
d. 4.57%

Answer 1

The comparent cost of preferred stock for Giant is approximately 10.52%.

Step-by-step explanation:

The comprarent cost of preferred stock for Giant can be calculated using the formula:

Comparent Cost of Preferred Stock = Annual Dividend / Price per Share

In this case, the annual dividend is 13% of the par value and the price per share is 1237% of the par value. We can calculate the comparent cost as follows:

Comparent Cost of Preferred Stock = 0.13 * Par Value / (1.237 * Par Value)

Simplifying the equation, we get:

Comparent Cost of Preferred Stock = 0.13 / 1.237

Calculating the ratio, the comparent cost of preferred stock for Giant is approximately 10.52%.