Topstone Industries' preferred stock pays an annual dividend of $4 per share. When issued, the shares sold for their par value of $100 per share. What is the cost of preferred stock if the current price is $125 per share?

Question

Quizplus · Accepted Answer

The cost of preferred stock is calculated as the annual dividend divided by the current price. So, $4 / $125 = 0.032 or 3.2%.

Topstone Industries' Preferred Stock Pays an Annual Dividend of $4