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    Cost of the newly issued preferred shares

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    Seven Eleven Stores is planning an expansion project that it desires to finance with newly issued preferred stock. The firm has an outstanding issue of preferred stock that pays a dividend of $4.25 per share, which is trading for $65 a share. The investment bankers have advised Seven Eleven that floatation costs will be 8% per share. What will be the cost of the newly issued preferred shares?

    a.) 6.5%

    b.) 7.1%

    c.) 8.3%

    d.) 9.7%

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    Solution Preview

    Preferred stock is a perpetuity and the cost is given as
    Annual ...

    Solution Summary

    The solution explains how to calculate the cost of the newly issued preferred shares.