Afirm has issued preferred stock at its $125 per share par value. the stock will pay a $15 annual dividend. the cost of issuing and selling the stock was $4 per share. the cost of the preferred stock is a. 12 percent b. 12.4 percent c. 7.2 percent d. 15 percent

Cost of preferred stock = 12%

correct option is A. 12 percent

Explanation:

given data

preferred stock = $125 per share

annual dividend = $15

cost of issuing and selling = $4 per share

to find out

cost of the preferred stock

solution

we know that Cost of preferred stock is express as

Cost of preferred stock = Annual dividend ÷ (Stock price-Flotation cost)     ...........................1

and we know  Flotation cost will be here = = 3.20 %

so

from equation 1 we get

Cost of preferred stock = Annual dividend ÷ (Stock price-Flotation cost)  

Cost of preferred stock = $15 ÷ ($125 - 3.20 %  )  

Cost of preferred stock = 0.120030

Cost of preferred stock = 12%

correct option is A. 12 percent

answer; /// i believe that the correct answer is (b) money set aside for emergency repairs;