Question

The 7 percent preferred stock of midwest muffler and towing is selling for $65 per share. what is the firm’s cost of preferred stock if the tax rate is 21 percent and the par value per share is $100?

Answers

  1. 10.77 percent  is the firm’s cost of preferred stock if the tax rate is 21 percent and the par value per share is $100.
    Unitary method is a process by which we find the value of a single unit from the value of multiple units and the value of multiple units from the value of a single unit. It is a method that we use for most of the calculations in math.
    The cost is calculated by the formula by :-
    Cost = Annual dividend paid / Price of preferred stock per share
    Substituting the given values in the formula we get,
    cost = (0.07 x 100)/65
    cost = 10.77 percent.
    Learn more about Unitary method here :
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