A company has preferred stock with a current market price of $18 per share. The preferred stock
pays an annual dividend of 4% based on a par value of $100. Flotation costs associated with the sale
of preferred stock equal $1.50 per share.
The company's marginal tax rate is 40%. Therefore, the
cost of preferred stock is
A) 28.80%. B) 24.24%. C) 14.55%. D) 22.22%.
B
Business
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