9-7. (Cost of preferred stock) Your firm is planning to issue preferred stock. The stock sells for $115; however, if new stock is issued, the company would receive only $98. The par value of the stock is $100, and the dividend rate is 14 percent of net income. What is the cost of capital for the stock to your firm?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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9-7. (Cost of preferred stock) Your firm is planning to issue preferred stock. The stock
sells for $115; however, if new stock is issued, the company would receive only $98.
The par value of the stock is $100, and the dividend rate is 14 percent of net income.
What is the cost of capital for the stock to your firm?
Transcribed Image Text:9-7. (Cost of preferred stock) Your firm is planning to issue preferred stock. The stock sells for $115; however, if new stock is issued, the company would receive only $98. The par value of the stock is $100, and the dividend rate is 14 percent of net income. What is the cost of capital for the stock to your firm?
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