Preferred stock of Ford Motors pays a dividend of $4 each year and trades at a price of $30.What is the cost of preferred stock capital for Ford?

Question

Quizplus · Accepted Answer

The cost of preferred stock capital is calculated by dividing the annual dividend by the current market price. In this case, the cost of preferred stock capital for Ford is:
Cost of preferred stock = Annual dividend/Current market price = $4/$30 = 0.1333 or 13.3% (rounded to one decimal place). Therefore, the correct answer is A).

Preferred Stock of Ford Motors Pays a Dividend of $4