Of the components shown below, which is least likely to be of value in calculating the cost of preferred stock?
A)flotation costs per share
B)book value of a preferred share
C)dividends per share
D)initial market price per share

Question

Quizplus · Accepted Answer

The book value of a preferred share may be useful in determining the company's financial position, but it is not directly related to the cost of preferred stock. The other three components are directly related to the cost of preferred stock - flotation costs per share affect the initial cost of issuing preferred stock, dividends per share affect the ongoing cost of paying dividends to preferred stockholders, and the initial market price per share affects the cost of buying the preferred stock.

Of the Components Shown Below, Which Is Least Likely to Be