The well derrick has 5.5 percent preferred stock outstanding that sells for $48 a share. this stock was originally issued at $45 per share. what is the cost of preferred stock if the firm's tax rate is 35 percent?

Question

Business

Tess Branch

7 May, 06:58

The well derrick has 5.5 percent preferred stock outstanding that sells for $48 a share. this stock was originally issued at $45 per share. what is the cost of preferred stock if the firm's tax rate is 35 percent?

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Answers (1)

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Marcel Franklin · Answer 1

To solve:

Percentage of preferred stock outstanding = 5.5%

Price per share = $48

Price of preferred stock = (.055 x $100) / $48

Price of preferred stock =.1146

To turn into a percentage:

% = (.1146) (100)

11.46%