A Company is paying an annual dividend of $3.63 for its preferred stock which is selling...

A Company is paying an annual dividend of $3.63 for its preferred stock which is selling for $60.70. There is a selling cost of $3.30. What is the after tax cost of preferred stock if the firm's tax rate is 33%?

A. 6.11% B. 2.02% C. 5.79% D. 6.32%

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Expert Solution

Cost of preferred stock = Dividend / (Price - selling cost)

Cost of preferred stock = $3.63 / ($60.70 -$3.30)

Cost of preferred stock = 6.32%

Answer: Option D

jeff jeffy answered 2 years ago

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