Answer:
the cost of the preferred stock is 13.37%
Explanation:
The computation of the cost of the preferred stock is shown below:
= Annual dividend ÷ Price × (1 - flotation cost)
= $11 ÷ 87.50 × (1 - 0.06)
= $11 ÷ $82.25
= 13.37%
Hence, the cost of the preferred stock is 13.37%
We simply applied the above formula so that the correct value could come
And, the same is to be considered
