Question

If the dividends paid on a preferred stock issue are $5 per share and the price of the stock after subtracting flotation costs is $25, calculate cost of preferred stock.

a	0.2%
b	6%
c	20%
d	5%

Answer 1

Ans c 20%

cost of preferred stock = Dividend / Price * 100

                                = 5 / 25 * 100

                                 = 20%