Problem 102 Cost of Preferred Stack Tunney Industries can is

Problem 10-2 Cost of Preferred Stack Tunney Industries can issue perpetual preferred stock at a price of $65.50 a share. The stock would pay a constant annual dividend of $6.50 a share. What is the company\'s cost of preferred stock, rp? Round your answer to two decimal places.

Solution

Current Price of Preferred Stock = $65.50
Annual Dividend = $6.50

Cost of Preferred Stock = Annual Dividend / Current Price of Preferred Stock
Cost of Preferred Stock = $6.50 / $65.50
Cost of Preferred Stock = 9.92%