QUESTION 14 ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing preferred stock? O a. 1% O b.6.5% Oc. 11% O d.9% QUESTION 15 Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock. O a. 5.6% Ob.3.8% O c.7% Od.4.6%

QUESTION 14 ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing preferred stock? O a. 1% O b.6.5% Oc. 11% O d.9% QUESTION 15 Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock. O a. 5.6% Ob.3.8% O c.7% Od.4.6%

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 15PROB

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