Jensen\'s Travel Agency has 11 percent preferred stock outstanding that is curre

Question

Jensen's Travel Agency has 11 percent preferred stock outstanding that is currently selling for $38 a share. The market rate of return is 15 percent and the firm's tax rate is 34 percent. What is Jensen's cost of preferred stock?

9.84 percent

28.95 percent

9.47 percent

39.47 percent

7.26 percent

Jensen's Travel Agency has 11 percent preferred stock outstanding that is currently selling for $38 a share. The market rate of return is 15 percent and the firm's tax rate is 34 percent. What is Jensen's cost of preferred stock?

Explanation / Answer

Cost of preferred stock = 11 / 38 * 100%

= 28.95%

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