The cost of new preferred stock is equal to
A) the preferred stock dividend divided by the market price.
B) the preferred stock dividend divided by its par value.
C) (1 - tax rate) times the preferred stock dividend divided by net price.
D) preferred stock dividend divided by the net selling price of preferred.

Question

Quizplus · Accepted Answer

The cost of new preferred stock is calculated as the preferred stock dividend divided by the net selling price of the preferred stock. This accounts for any flotation or issuance costs associated with selling the new stock.

The Cost of New Preferred Stock Is Equal to