Cost of equity financing problem

Business & Finance
Tutor: None Selected Time limit: 1 Day

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%

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Sep 28th, 2015

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