Your firm is considering the issuance of preferred shares for the first time.The average yield on preferred stock for firms in your industry is 6.50%.If you wish to issue preferred stock at par with a face value of $50.00 per share,approximately how large would you need to make your annual preferred dividend?

Question

Quizplus · Accepted Answer

The annual preferred dividend can be calculated by multiplying the face value of the preferred stock ($50) by the average yield for preferred stock in the industry (6.50% or 0.065). Thus, the annual preferred dividend would be $50 x 0.065 = $3.25. Therefore, the best choice is B.

Your Firm Is Considering the Issuance of Preferred Shares for the First