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What is the company's cost of preferred stock, rps?

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Tunney Industries can issue perpetual preferred stock at a price of $50 a share. The issue is expected to pay a constant annual dividend of $3.80 a share. The flotation cost on the issue is estimated to be 5 percent. What is the company's cost of preferred stock, rps?

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The solution explains how to determine the cost of preferred stock with discussion, calculations and the answer.

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The preferred stock is a perpetuity. The cost of a perpetuity is given as Cash Flow/Price. ...

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