Wally's War Duds Has a Preferred Share Issue Outstanding with a Current

question 74

Multiple Choice

Wally's War Duds has a preferred share issue outstanding with a current price of $26.57. The firm is expected to pay a dividend of $1.86 per share a year from today. What is the firm's cost of preferred equity? Round your final answer to nearest percentage.

• A) 6.50%
• B) 7.00%
• C) 7.50%
• D) 8.00%

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Definitions:

Quantitative Techniques

Mathematical and statistical methods used to analyze numerical data, often applied in economics, finance, and operational research to facilitate decision-making.

Nearly Identical Duration

A characteristic of two or more financial instruments whose cash flows match or are very close in terms of their time structure, minimizing interest rate risk.

Bullish Position

An investment strategy where an investor believes that a particular asset's price will rise.