Purchase Solution

Cost of Preferred Stock

Not what you're looking for?

Ask Custom Question

Hettenhouse Company's perpetual preferred stock sells for $102.50 per share, and it pays a $9.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?

Purchase this Solution
Solution Summary

Cost of Preferred Stock has been calculated.

Solution Preview

The answer is also in the attached file:

Hettenhouse Company's perpetual preferred stock sells for $102.50 per share, and it pays a $9.50 annual dividend.  If the company were to sell a new preferred issue, ...

Purchase this Solution
Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Income Streams

In our ever changing world, developing secondary income streams is becoming more important. This quiz provides a brief overview of income sources.

Business Processes

This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.

Basics of corporate finance

These questions will test you on your knowledge of finance.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

View More Free Quizzes
Related BrainMass Solutions

  • Correct formula for finding cost of preferred stock

    119102 Correct formula for finding cost of preferred stock What is the cost of Preferred Stock?

  • WACC

    of common stock x cost of common stock + proportion of preferred stock x cost of preferred stock Since the proportions for debt, common stock and preferred stock is not given, for illustration assume that these are 40%, 50% and

  • After-tax cost of preferred stock

    348040 After-tax cost of preferred stock A firm's preferred stock pays an annual dividend of $4, and the stock sells for $80. Flotation costs for new issuances of preferred stock are 5% of the stock value.

  • Cost of the preferred stock

    (disregard flotation cost) a. 7.76% b. 8% c. 8.25% d. there is not enough information to answer the question Cost of the preferred stock= Dividend/Preferred stock price Dividend= 8%of par value= $8 Price of Preferred stock= $97 Cost of

  • Cost of preferred stocks

    Calculate the cost of the preferred stock Cost of preferred stock= Dividend/(Selling price-flotation cost) =12/(97.5-2.5) =12.63% 2.

  • Cost of preferred stock; cost after flotation costs

    407887 Cost of preferred stock; cost after flotation costs Taylor Systems has just issued preferred stock. The stock has a 12% annual dividend and a $100 par value and was sold at $97.50 per share.

  • Cost of Preferred stock

    Cost of Preferred stock = Dividend / (Selling price - floatation cost) Floatation cost = 4% of 102.50 = $4.10 Cost of Preferred stock = 9.50/(102.50-4.10) Cost of Preferred stock = 9.50/98.40 = 9.65% The solution cost of preferred stock for use

  • Managerial Finance 476(II): Do we need to make a tax adjustment when Medco Corporation issues preferred stock?

    The cost of preferred stock is calculated as the preferred dividend divided by the net price of the preferred stock: Kp = D / Pn = D/(P - flotation cost) = 6/(80-3) = 0.078 = 7.8% b. No tax adjustment is required.

  • Cost of Preferred Stock

    Compute the cost of preferred stock for Medco Corp.

  • Weighted average cost of capital (WACC)

    WACC=proportion of debt x after tax cost of debt + proportion of common stock x cost of common stock + proportion of preferred stock x cost of preferred stock proportion After tax cost proportion x Cost Debt: 35.00%

View More Related Solutions