A Firm Has $2 Million Market Value and It Sells

question 37

Multiple Choice

A firm has $2 million market value and it sells preferred stock with a par value of $100.If the coupon rate on the preferred stock is 8% and the preferred stock trades at $90,what is the cost of preferred stock financing?

• A)8.75%
• B)8.89%
• C)9.21%
• D)9.35%
• E)10.16%

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Definitions:

Low Uncertainty Avoidance

A cultural perspective that tolerates ambiguity and uncertainty, and is more accepting of unstructured situations.

Uncertainty Avoidance

A cultural dimension that describes the degree to which people in a society attempt to cope with anxiety by minimizing uncertainty.

The United Kingdom

A sovereign country located off the northwestern coast of mainland Europe, comprising England, Scotland, Wales, and Northern Ireland.

Gender Egalitarianism

The belief in and practice of equal rights, responsibilities, and opportunities for individuals of all genders.