What is the cost of preferred stock if the stock is selling for $208, the dividend is $35, and flotation costs are 5% of the selling price?

Question

Quizplus · Accepted Answer

The cost of preferred stock is calculated using the formula: Dividend / (Price - Flotation Costs). Here, the flotation cost is 5% of $208, which is $10.40. So, the cost of preferred stock is $35 / ($208 - $10.40) = $35 / $197.60 = 0.1772 or 17.7%.

What Is the Cost of Preferred Stock If the Stock