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What Is the Cost of Preferred Stock for Foggy Futures

Question 81

Multiple Choice

What is the cost of preferred stock for Foggy Futures Weather Forecasters? The firm is in the 40% tax bracket.The optimal capital structure is listed below:
 Source of Capital  Weight  Long-Term Debt 25% Preferred Stock 20% Common Stock 55%\begin{array}{|l|c|}\hline \text { Source of Capital } & \text { Weight } \\\hline \text { Long-Term Debt } & 25 \% \\\hline \text { Preferred Stock } & 20 \% \\\hline \text { Common Stock } & 55 \% \\\hline\end{array}

 What is the cost of preferred stock for Foggy Futures Weather Forecasters? The firm is in the 40% tax bracket.The optimal capital structure is listed below:  \begin{array}{|l|c|} \hline \text { Source of Capital } & \text { Weight } \\ \hline \text { Long-Term Debt } & 25 \% \\ \hline \text { Preferred Stock } & 20 \% \\ \hline \text { Common Stock } & 55 \% \\ \hline \end{array}     A) 4.9% B) 11.55% C) 7.88% D) 8.44%


A) 4.9%
B) 11.55%
C) 7.88%
D) 8.44%

Correct Answer:

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