Question
Cost of preferred stock. Kyle is raising funds for his company by selling preferred stock. The preferred s The stock is selling for $62.58 in the market. Kyle hires Wilson Investment Ba stock. What is the cost of preferred stock for Kyle using the investment banker? tock has a par value of $84 and a dividend rate of 9.2%. nkers to sell the preferred stock. Wilson charges a fee of 3% on the sale of preferred What is the cost of preferred stock for Kyle using the investment banker? 96 (Round to two decimal places.)
Explanation / Answer
Annual dividend=84*9.2%=$7.728
Hence cost of preferred stock=Annual dividend/Current price(1-fee charges)
=7.728/(62.58(1-0.03)
=7.728/60.7026
which is equal to
=12.73%(Approx).