Assume the capital structure of XYZ Company: Bonds payable, 10% . . . . . . . 500,000 Preferred stock, 8%, P100 par . . . . . . . . 100,000 Common stock, 100,000 shares. . . . . . . 400,000 Other data shows as follows: Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000 Variable costs. . . . . . . . . . . . . . . . . . . . . . 362,500 Fixed Operating costs. . . . .. . . . . . . . . . . 187,500 Income tax rate . . . . . . . . . . . . . . . 30% Dividend growth rate . . . . . . . . . . . . . . . . 2% Current market price: Common stock. . . . . . . . . . . . . P5/share Preferred stock. . . . . . . . . . . . . P160/share Transaction costs: Common stock. . . . . . . . . . . . . . P1/share Preferred stock. . . . . . . . . . . . . . P 10/share What is the cost of issuing preferred securities?
Assume the capital structure of XYZ Company:
Bonds payable, 10% . . . . . . . 500,000
Common stock, 100,000 shares. . . . . . . 400,000
Other data shows as follows:
Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . 800,000
Variable costs. . . . . . . . . . . . . . . . . . . . . . 362,500
Fixed Operating costs. . . . .. . . . . . . . . . . 187,500
Income tax rate . . . . . . . . . . . . . . . 30%
Dividend growth rate . . . . . . . . . . . . . . . . 2%
Current market price:
Common stock. . . . . . . . . . . . . P5/share
Preferred stock. . . . . . . . . . . . . P160/share
Transaction costs:
Common stock. . . . . . . . . . . . . . P1/share
Preferred stock. . . . . . . . . . . . . . P 10/share
What is the cost of issuing preferred securities?
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