A corporation has $5,000,000 of 8 percent preferred stock outstanding and a 21 percent tax rate.The after-tax cost of the preferred stock is ________.

Name: A corporation has $5,000,000 of 8 percent preferred stock outstanding and a 21 percent tax rate.The after-tax cost of the preferred stock is ________.
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Question

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The after-tax cost of preferred stock is the preferred dividend multiplied by (1 - the tax rate). In this case, the after-tax cost of preferred stock is $5,000,000 * 0.08 * (1 - 0.21) = $506,329.

A Corporation Has $5,000,000 of 8 Percent Preferred Stock Outstanding