Bosio Inc.\'s perpetual preferred stock sells for $96.20 per share, and it pays
ID: 2643763 • Letter: B
Question
Bosio Inc.'s perpetual preferred stock sells for $96.20 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 10.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC? Bosio Inc.'s perpetual preferred stock sells for $96.20 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 10.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC?Explanation / Answer
price of share fater flotation cost = 96.20 * (1-10%) = 86.58
cost of preferred stock = annual dividend/price per share
= 8.50/86.58
= 9.82%