A company plans to raise additional capital by issuing new shares of preferred stock, which has a current value of $40 per share. If the company pays a $2.50 dividend, what should be the cost to issue new shares if the company will incur flotation costs of 6%? O 6.6% O 6.25% O 12.6% O 12%

A company plans to raise additional capital by issuing new shares of preferred stock, which has a current value of $40 per share. If the company pays a $2.50 dividend, what should be the cost to issue new shares if the company will incur flotation costs of 6%? O 6.6% O 6.25% O 12.6% O 12%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter18: Initial Public Offerings, Investment Banking, And Capital Formation

Section: Chapter Questions

Problem 9MC

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A company plans to raise additional capital by issuing new shares of preferred stock, which has a
current value of $40 per share. If the company pays a $2.50 dividend, what should be the cost to
issue new shares if the company will incur flotation costs of 6%?
O 6.6%
O 6.25%
O 12.6%
O 12%

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