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Computation of the After-Tax Cost of a Preferred Stock

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Calculate the after-tax cost of a preferred stock for Bozeman-Western Airlines, Inc., which is planning to sell $10 million of $4.50 cumulative preferred stock to the public at a price of $48 a share. The company has a marginal tax rate of 40 percent.

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Solution Summary

In a brief, about 3 step solution, this response explains how to compute the after tax cost of a preferred stock. The calculations required are simple in nature and easy to follow.

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