Question

At the present time, Tamin Enterprises does not have any preferred stock outstanding but is looking to include preferred stock in its capital structure in the future. Tamin has found some institutional investors that are willing to purchase its preferred stock issue provided that it pays a perpetual dividend of $11 per share.

If the investors pay $95.70 per share for their investment, then Tamin’s cost of preferred stock (rounded to four decimal places) will be ____.

Answer 1

11.4943%

Step-by-step explanation:

Dividend are fixed = Debt

Usually has no specified maturity date = Equity

Cost of preference share = Annual dividend / Price

= 11/95.7= 11.4943&