Taylor Systems has just issued preferred stock. The stock has a 9% annual dividend and a...
Taylor Systems has just issued preferred stock. The stock has a 9% annual dividend and a $ 80 par value and was sold at $86.40 per share. In addition, flotation costs of $5.60 per share were paid. Calculate the cost of the preferred stock. The cost of the preferred stock is %.
Homework Answers
Annual dividend = $80 * 9% = $7.2
Cost of the preferred stock = Annual dividend / (Stock price - Flotation costs)
Cost of the preferred stock = $7.2 / ($86.40 - $5.60)
Cost of the preferred stock = 0.0891 or 8.91%
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