Cost of preferred stock. Kyle is raising funds for his company by selling prefer

Question

Cost of preferred stock. Kyle is raising funds for his company by selling preferred stock. The preferred s The stock is selling for $62.58 in the market. Kyle hires Wilson Investment Ba stock. What is the cost of preferred stock for Kyle using the investment banker? tock has a par value of $84 and a dividend rate of 9.2%. nkers to sell the preferred stock. Wilson charges a fee of 3% on the sale of preferred What is the cost of preferred stock for Kyle using the investment banker? 96 (Round to two decimal places.)

Explanation / Answer

Annual dividend=84*9.2%=$7.728

Hence cost of preferred stock=Annual dividend/Current price(1-fee charges)

=7.728/(62.58(1-0.03)

=7.728/60.7026

which is equal to

=12.73%(Approx).

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