Question

In: Finance

 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.

Solutions

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 10 months ago
Next > < Previous

Related Solutions

Filmore, Inc. just issued preferred stock. If the preferred dividend is $1.90 per share and shareholders...
Filmore, Inc. just issued preferred stock. If the preferred dividend is $1.90 per share and shareholders require an 3% return, what is the maximum amount an investor would pay for one share of Filmore preferred stock? (Enter your answer to the nearest cent without & or commas.)
- Earley Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields...
- Earley Corporation issued perpetual preferred stock with a 12% annual dividend. The stock currently yields 10%, and its par value is $100. Round your answers to the nearest cent. What is the stock's value? Suppose interest rates rise and pull the preferred stock's yield up to 13%. What is its new market value? - Farley Inc. has perpetual preferred stock outstanding that sells for $36 a share and pays a dividend of $5.00 at the end of each year....
Leisure Limited issued perpetual preferred stock with 7.5% annual dividend. The stock price is HK$115 and...
Leisure Limited issued perpetual preferred stock with 7.5% annual dividend. The stock price is HK$115 and its par value is $100. (a) Required: (i) What is the current yield of Leisure Limited’s preferred stock? . (ii) Suppose the market interest rate rises and Leisure’s preferred stock’s yield rises to 8%. What is the price of Leisure’s preferred stock then? (b) The sales revenue of Carpe Diem Limited for 2019 is $100 million. The CEO told the sales director in December...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 12% of its $100 par value. Preferred stock of this type currently yields 9%. Assume dividends are paid annually. What is the estimated value of Rolen's preferred stock? Round your answer to the nearest cent. $_______________ Suppose interest rate levels have risen to the point where the preferred stock now yields 12%. What would be the new estimated value of Rolen's preferred stock? Round your answer...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 10% of...
Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 10% of its $100 par value. Preferred stock of this type currently yields 8%. Assume dividends are paid annually. a. What is the estimated value of Rolen’s preferred stock? b. Suppose interest rate levels have risen to the point where the preferred stock now yields 12%. What would be the new estimated value of Rolen’s preferred stock?
ABC Corp. just issued some new preferred stock. The issue will pay a $3 quarterly dividend...
ABC Corp. just issued some new preferred stock. The issue will pay a $3 quarterly dividend in perpetuity, begining 12 years from now. If the market requires a 8% return on this investment, how much does a share of preferred stock cost today? Suppose that you buy a semi-annual coupon bond with coupon rate of 10%; the market price of $1,120, and the time to maturity of 17 years. Seven years from now, the YTM on your bond is expected...
Holdup Bank has an issue of preferred stock with a stated dividend of $7 that just...
Holdup Bank has an issue of preferred stock with a stated dividend of $7 that just sold for $87 per share. What is the bank’s cost of preferred ?
A firm has common and preferred stock outstanding, both of which just paid a dividend of...
A firm has common and preferred stock outstanding, both of which just paid a dividend of $3 per share. Which do you think will have a higher share price and why? If the firm also has an issue of non-callable debentures outstanding, which do you think investors will require a higher return on, the debentures or the shares of common stock? Explain
A firm has common and preferred stock outstanding, both of which just paid a dividend of...
A firm has common and preferred stock outstanding, both of which just paid a dividend of $3 per share. Which do you think will have a higher share price and why? If the firm also has an issue of non-callable debentures outstanding, which do you think investors will require a higher return on, the debentures or the shares of common stock? Explain.
A firm has common and preferred stock outstanding, both of which just paid a dividend of...
A firm has common and preferred stock outstanding, both of which just paid a dividend of $3 per share. Which do you think will have a higher share price and why? If the firm also has an issue of non-callable debentures outstanding, which do you think investors will require a higher return on, the debentures or the shares of common stock? Explain
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT