Intermediate Financial Management
14th Edition
ISBN: 9780357516782
Author: Brigham, Eugene F., Daves, Phillip R.
Publisher: Cengage Learning
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Chapter 11, Problem 3P
Cost of
Duggins Veterinary Supplies can issue perpetual preferred stock at a price of $50 a share with an annual dividend of $4.50 a share. Ignoring flotation costs, what is the company’s cost of preferred stock, rps?
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Subject: Financial strategy & policy
Question No 3 (part ii)
Answer the following.
ii) XYZ Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $97.00; but flotation costs will be 5% of the market price per share. What is the cost of the preferred stock, including flotation?
Cost of preferred stock torch industries can issue perpetual preferred stock at a price of 57.00 a share. The stock would pay a constant annual dividend of 6.00 a share. What is the company cost of preferred stock, rp?
e.g.1 Bright Lights company expects to issue
preferred stock that pays $10.25 dividend per
share. This share will sell for $96 in the
market. It will cost 3% or $2.88 per share as
issuing cost. What is the cost of the preferred
stock?
Chapter 11 Solutions
Intermediate Financial Management
Ch. 11 - Define each of the following terms:
Weighted...Ch. 11 - Prob. 2QCh. 11 - Prob. 3QCh. 11 - Distinguish between beta (i.e., market) risk,...Ch. 11 - Suppose a firm estimates its overall cost of...Ch. 11 - 11-1 After-Tax Cost of Debt
Calculate the...Ch. 11 - Cost of Preferred Stock
Duggins Veterinary...Ch. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6P
Ch. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Calculation of gL and EPS Spencer Suppliess stock...Ch. 11 - The Cost of Equity and Flotation Costs
Messman...Ch. 11 - Prob. 14PCh. 11 - WACC Estimation
On January 1, the total market...Ch. 11 - During the last few years, Jana Industries has...Ch. 11 - What is the market interest rate on Jana’s debt,...Ch. 11 - Prob. 3MCCh. 11 - Prob. 4MCCh. 11 - Prob. 5MCCh. 11 - Prob. 6MCCh. 11 - Prob. 7MCCh. 11 - Prob. 10MCCh. 11 - Prob. 11MCCh. 11 - What procedures can be used to estimate the...Ch. 11 - Prob. 13MCCh. 11 - Prob. 14MCCh. 11 - What four common mistakes in estimating the WACC...
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- A company’s preferred stock currently trades at $80 per share and pays a $6 annualdividend per share. Ignoring flotation costs, what is the firm’s cost of preferred stock?arrow_forwardRatio Analysis MJO Inc. has the following stockholders equity section of the balance sheet: On the balance sheet date, MJOs stock was selling for S25 per share. Required: Assuming MJOs dividend yield is 1%, what are the dividends per common share? Assuming MJOs dividend yield is 1% and its dividend payout is 20%, what is MJOs net income?arrow_forwardIf Dhofar Popcorn is issuing preferred stock at OMR 95 per share, with a stated dividend of OMR 15, and a flotation cost of 2.15%, then what is the cost of preferred stock? Select one: a. 15.13% b. 10% c. 16.13% d. 15% e. Nonearrow_forward
- 1. If the dividends paid on a preferred stock issue are $2.2 per share and the cost of preferred s Assume there are no flotation costs. Price of a preferred stock is a perpetuity if the answer is $10.52 Enter 10.52arrow_forwardPerpetual preferred stock sells for $97.50 per share, and it pays an $4.85 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? A. 4.11% B. 5.18% C. 8.01% D. 7.32% E. 6.25%arrow_forwardEffect of Stock Split a. What will be the number of shares outstanding after the split? shares b. If the common stock had a market price of $95 per share before the stock s plit, what would be an approximate market price per share after the split? per sharearrow_forward
- Perpetual preferred stock sells for $97.50 per share, and it pays an $6.85 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? a. 7.32% b.6.25% c. 8.01% d.5.18% e. 4.11%arrow_forwardSalalah Services is issuing preferred stock at OMR 115 per share, with a stated dividend of OMR 18 and a flotation cost of 0.3%, then what is the cost of preferred stock? Select one: a. 15.69% O b. None c. 15.60% d. 16.13% O e. 15%arrow_forwardCommon versus Preferred Stock Suppose a company has a preferred stock issue and a common stock issue. Both have just paid a $2 dividend. Which do you think will have a higher price, a share of the preferred or a share of the common?arrow_forward
- A firm’s preferred stock currently sells for $90 per share and pays a dividend of $9 per share. However, the firm will only receive $85 per share from the sale of new preferred stock due to the floatation costs. What’s the firm’s component cost of Preferred stock? 10.6% 10.9% 11.8% 10.0%arrow_forwardColumbus Veterinary Supplies can issue perpetual preferred stock at a price of $82 a share. The issue is expected to pay a constant annual dividend of $6.38 a share. Ignoring flotation costs, what is the company’s cost of preferred stock,rps? Express your answer in percentage (without the % sign) and round it to two decimal placesarrow_forwardA company's perpetual preferred stock currently sells for $90.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the issue price. What is the firm's cost of preferred stock? Group of answer choices 8.66% 8.93% 9.21% 9.12% 9.95%arrow_forward
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