Cost of equity financing problem

label Business & Finance
account_circle Unassigned
schedule 1 Day
account_balance_wallet $5

Nature Food Inc. needs to estimate the cost of financing on preferred stock. The firm has preferred stock outstanding that pays a constant dividend of $3.98 per year. That preferred stock is currently selling for $94.69. However, the underwriter would charge flotation costs of $2.62 per share. What is the form’s cost of preferred stock financing?

Round the answers to two decimal places in percentage form.

Sep 28th, 2015

Thank you for the opportunity to help you with your question!

Cost of Preferred Stock =(Annual Dividend on Preferred Stock+ floatation cost)/Current Market Price of Preferred Stock= (3.98+2.62)/94.69 = 6.97%

Please let me know if you need any clarification. I'm always happy to answer your questions.
Sep 28th, 2015

Did you know? You can earn $20 for every friend you invite to Studypool!
Click here to
Refer a Friend
...
Sep 28th, 2015
...
Sep 28th, 2015
Jun 24th, 2017
check_circle
Mark as Final Answer
check_circle
Unmark as Final Answer
check_circle
Final Answer

Secure Information

Content will be erased after question is completed.

check_circle
Final Answer