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 Taylor Systems has just issued preferred stock. The stock has a 9 ​% annual dividend and...

 Taylor Systems has just issued preferred stock. The stock has a 9 ​% annual dividend and a $ 75 par value and was sold at ​$72.00 per share. In​ addition, flotation costs of ​$6.00 per share were paid. Calculate the cost of the preferred stock.

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Expert Solution

Information provided:

Annual dividend= 9%

Par value= $75

Market price= $72

Flotation cost= $6

Dividend payment= 0.09*$75= $6.75

Money received on sale of preferred stock= $72 - $6= $66

Cost of preferred stock= Preferred dividend/ Money received on sale of preferred stock

                                        = $6.75/ $66

                                        = 0.1023*100

                                        = 10.23%.

In case of any query, kindly comment on the solution.

jeff jeffy answered 3 months ago
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