The cost of preferred equity: Billy's Goat Coats has a preferred share issue outstanding with a current price of $38.89. The firm last paid a dividend on the issue of $3.50 per share. What is the firm's cost of preferred equity?

Question

Quizplus · Accepted Answer

The cost of preferred equity is calculated as the dividend divided by the current price of the preferred share. Here, it is $3.50 / $38.89 = 0.09 or 9%.

The Cost of Preferred Equity: Billy's Goat Coats Has a Preferred