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The Shoe Box pays an annual dividend of $3.80 on its preferred stock. What is the cost of preferred if the stock currently sells for $42.70 a share and the tax rate is 21 percent
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The Shoe Box pays an annual dividend of $3.80 on its preferred stock. What is the cost of preferred if the stock currently sells for $42.70 a share and the tax rate is 21 percent

User Nietras
by
3.7k points

1 Answer

2 votes

Answer:

8.90%

Step-by-step explanation:

D = $3.80

P = $42.70

Tax = 21%

R =?

from the given information the dividend model is to be used

P = D1/r-g

42.70 = 3.80/r-0

42.70r =3.80

r =3.80/42.70

r =0.8899/8.90%

User Istruble
by
3.4k points
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