What is the after-tax cost of preferred stock that sells for $10.00 per share and offers a $1.20 dividend when the tax rate is 35%?

Name: What is the after-tax cost of preferred stock that sells for $10.00 per share and offers a $1.20 dividend when the tax rate is 35%?
Brand: Quizplus
Rating: 4.9 (58 reviews)

Question

Quizplus · Accepted Answer

The after-tax cost of preferred stock is the dividend divided by the price per share. Taxes do not affect preferred stock dividends, so the tax rate is irrelevant. The cost is $1.20 / $10.00 = 12.00%.

What Is the After-Tax Cost of Preferred Stock That Sells