If a preferred stock is callable, then the calculation of the cost of preferred stock financing is

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If a preferred stock is callable, it means the issuer has the right to redeem the stock at a certain price within a specified period. This makes the cost of preferred stock financing similar to that for bonds, which also have a callable feature. The cost of preferred stock financing is calculated using the formula Dp/Pn, where Dp is the annual preferred stock dividend and Pn is the net proceeds from the sale of preferred stock after flotation costs. However, the fact that the preferred stock is callable may affect the price at which it can be sold, which would impact the net proceeds and hence the cost of financing.

If a Preferred Stock Is Callable, Then the Calculation of the Cost