Libby has bought 100 preferred stocks of Alexis Ltd. This year, Alexis Ltd. paid a dividend of $2.50 per share. The price of each preferred share is $15. What is the cost of preferred equity?

Question

Gaven Meza

Social Studies

3 October, 16:34

Libby has bought 100 preferred stocks of Alexis Ltd. This year, Alexis Ltd. paid a dividend of $2.50 per share. The price of each preferred share is $15. What is the cost of preferred equity?

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Answers (1)

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Trinity Lyons · Answer 1

To calculate the cost of preferred equity, you need to use the following formula:

Rps = Dps/Pnet

where:

Dps = preferred dividends

Pnet = net issuing price

Substituting the given in the formula, you can get the following:

$2.50/$15 = 16.67%

Therefore, the cost of preferred equity is 16.67%.