A Company Has Preferred Stock with a Current Market Price

question 26

Multiple Choice

A company has preferred stock with a current market price of $18 per share.The preferred stock pays an annual dividend of 4% based on a par value of $100.Flotation costs associated with the sale of preferred stock equal $1.50 per share.The company's marginal tax rate is 40%.Therefore,the cost of preferred stock is

• A) 28.80%.
• B) 24.24%.
• C) 22.22%.
• D) 14.55%.

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Definitions:

Depression

A mood disorder characterized by unrelenting feelings of sadness or a lack of enthusiasm for tasks, causing notable disruption in daily routines.

Individual Therapy

A form of psychotherapy where the therapy is conducted on a one-on-one basis between a therapist and patient.

Monoamine Oxidase (MAO) Inhibitors

Antidepressant drugs that lower MAO activity and thus increase the level of norepinephrine activity in the brain.

Tyramine

A naturally occurring monoamine compound that has been associated with the "cheese effect," potentially causing dangerous hikes in blood pressure when consumed in large amounts by individuals taking certain types of antidepressants.