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Current price of each preferred stock = $27.50
Net price after issuance costs = $25.60
Hence floatation costs = 27.50 – 25.60 = $1.90
Dividends per share = $3.00
To calculate the cost of existing preferred stock:
Cost of existing preferred stock = X 100
= X 100 = 0.10909 X 100 = 10.909%
To calculate the cost of new preferred stock:
Cost of new preferred stock = X 100
= X 100 = X 100 = 0.1172 X 100 = 11.72%
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