honeycfa

The cost of preferred stock is equal to the preferred stock dividend:

A) divided by the market price.

B) divided by its par value.

C) multiplied by the market price.

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The cost of preferred stock, k_ps, is D_ps ÷ price.

honeycfa

A $100 par, 8% preferred stock is currently selling for $80. What is the cost of preferred equity?

A) 10.8%.

B) 8.0%.

C) 10.0%.

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k_ps = $8 / $80 = 10%