Question

Q4

A firm's preferred stock pays an annual dividend of $4, and the stock sells for $72. Flotation costs for new issuances of preferred stock are 7% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 39%? (Round your answer to 2 decimal places.)

Q5

A firm is paying an annual dividend of $5.00 for its preferred stock which is selling for $67.00. There is a selling cost of $3.00. What is the after-tax cost of preferred stock if the firm's tax rate is 39%? (Round your answer to 2 decimal places.)

Q6

Kuhns Corp. has 160,000 shares of preferred stock outstanding that is cumulative and 100,000 common stock outstanding. The preferred dividend is $5.90 per share and has not been paid for 3 years. If Kuhns earned $1.40 million this year, what could be the maximum payment to the preferred stockholders on a per share basis?(Round your answer to 2 decimal places.)

Q7

Tricki Corp stock sells for $90 rights-on, and the subscription price is $80. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is Tricki's expected price when it begins trading ex-rights? (Round your answer to 2 decimal places.)

Answer 1

Q4 A firm's preferred stock pays an annual dividend of $4, and the stock sells for $72. Flotation costs for new issuances of preferred stock are 7% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 39%? (Round your answer to 2 decimal places.)

After tax cost of preferred stock = Dividend / (Stock Price * (1 - Flotation Cost)

After tax cost of preferred stock = 4 / (72 * (1 - 7%)

After tax cost of preferred stock = 4 / 66.96

After tax cost of preferred stock = 5.97%

* Tax doesn't effect the Cost of preferred stock

Q5 A firm is paying an annual dividend of $5.00 for its preferred stock which is selling for $67.00. There is a selling cost of $3.00. What is the after-tax cost of preferred stock if the firm's tax rate is 39%? (Round your answer to 2 decimal places.)

After tax cost of preferred stock = Dividend / (Stock Price - Flotation Cost)

After tax cost of preferred stock = 5 / (67 - 3)

After tax cost of preferred stock = 5 / 64

After tax cost of preferred stock = 7.81%

* Tax doesn't the Cost of preferred stock

Q6 Kuhns Corp. has 160,000 shares of preferred stock outstanding that is cumulative and 100,000 common stock outstanding. The preferred dividend is $5.90 per share and has not been paid for 3 years. If Kuhns earned $1.40 million this year, what could be the maximum payment to the preferred stockholders on a per share basis? (Round your answer to 2 decimal places.)

Total dividend to paid to preferred stock = Shares O/s * Dividend * years

Total dividend to paid to preferred stock = 160000 * 5.90 * 4

Total dividend to paid to preferred stock = 3776000 (since payable amount exceeds net income, whole net income will be paid to preferred stockholders')

maximum payment to preferred stock = Net Income available / Preferred stock O/s

maximum payment to preferred stock = 1400000 / 160000

maximum payment to preferred stock = $8.75

Q7 Tricki Corp stock sells for $90 rights-on, and the subscription price is $80. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is Tricki's expected price when it begins trading ex-rights? (Round your answer to 2 decimal places.)

Ex-Rights Price = (Total value before rights issue + proceeds from rights issue) / Shares O/s after right issue

Ex-Rights Price = (90 + $80/10) / (1 + 1/10)

Ex-Rights Price = 98 / 1.10

Ex-Rights Price = 89.09

* Dear Student, As per chegg rules. experts are required to answer only first 4 questions when multiple questions were asked. please ask remaining questions separately. thanks for understanding.