JJ firm issues preferred dividends at an annual rate of $2.39. Its current preferred stock price...

JJ firm issues preferred dividends at an annual rate of $2.39. Its current preferred stock price is $22.18. Assume that the equity beta for JJ is 1.09. The Yield on 10-year treasuries is 3.46%, and that the market risk premium for the year is 6%. The company's EPS expected growth is 2%. For this year, the dividends for JJ firm are the same for common and preferred stock; additionally the price for common stock is $31. What is the preferred cost of equity for JJ Firm?

Expert Solution

Cost of preferred stock = Annual dividend/Current preferred stock price

Cost of preferred stock = $2.39/$22.18

Cost of preferred stock = 10.78%

jeff jeffy answered 2 years ago

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