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4 February, 08:46

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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  1. 4 February, 08:50
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    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%
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