A company’s perpetual preferred stock pays an annual dividend of $2.10 per share. The preferred stock’s market value is $36.04 per share and the company’s tax rate is 30%. If the flotation costs for preferred stock are 6%, what is the company’s annual cost of new preferred stock financing? Question 4 options: 1) 5.87% 2) 7.25% 3) 6.54% 4) 6.20% 5) 5.41%

6.20%

Explanation:

The company’s annual cost of new preferred stock financing is the annual dividend payable on the preferred stock divided by the net price of the stock

annual dividend is $2.10

net price=market price*(1-flotation cost %)

net price=$36.04 *(1-6%)

net price=$ 33.88  

company’s annual cost of new preferred stock financing=$2.10/$33.88

company’s annual cost of new preferred stock financing==6.20%

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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