Question on cost of equity financing

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.

Oct 4th, 2015

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Cost of Preferred Stock = Dividend on Preferred/Price of Preferred/1-Flotation Costs
or            
Cost of Preferred Stock = Dividend on Preferred/Price of Preferred-Flotation Costs
           
Dividend  $  3.98          
Price  $  94.69          
Flotation Cost  $  2.62          
           
CPS  4.32%          

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Oct 4th, 2015

Thank you!!

Oct 4th, 2015

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