Calculate the Cost of Preferred Stock for Ohio Valley Power

question 154

Multiple Choice

Calculate the cost of preferred stock for Ohio Valley Power Company, which is planning to sell $100 million of $3.25 cumulative preferred stock to the public at a price of $25 per share. Flotation costs are $1.00 per share. Ohio Valley has a marginal income tax rate of 40%.

• A)13.0%
• B)7.8%
• C)8.12%
• D)13.54%

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