Question

Torch Industries can issue perpetual preferred stock at a price of $58.50 a share. The stock would pay a constant annual dividend of $7.00 a share. What is the company's cost of preferred stock, rp

Answer 1

11.96%

Step-by-step explanation:

Calculation for Torch Industries company's cost of preferred stock,

Using this formula

Cost of preferred stock = Dividend / Stock Price * 100

Where:

Dividend =$7.00

Stock Price = $58,50

Hence,

= $7 / $58.50 * 100

= 11.96%

Therefore the company's cost of preferred stock will be 11.96%