RetRyder Hand Trucks has a preferred share issue outstanding that pays a dividen

Question

RetRyder Hand Trucks has a preferred share issue outstanding that pays a dividend of $1.30 per year. The current cost of preferred equity for RetRyder is 7.70 percent. If RetRyder issues additional preferred shares that pay exactly the same dividend and the investment banker retains 5.50 percent of the sale price.What is the current price of preferred shares?What is the cost of the new preferred shares for RetRyder? (Round intermediate calculations to 4 decimal places, e.g. 1.2514 and final answer to 2 decimal places, e.g. 15.25%.)

Explanation / Answer

current price = dividend / (Cost -flotation cost)

                                           = 1.30 / (.0770 - .0550)

                                           = 1.30/ .022

                                           = 59.09 per share

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