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1 February, 09:41

The Shoe Box pays an annual dividend of $3.80 on its preferred stock. What is the cost of preferred if the stock currently sells for $42.70 a share and the tax rate is 21 percent

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  1. 1 February, 11:38
    0
    8.90%

    Explanation:

    D = $3.80

    P = $42.70

    Tax = 21%

    R = ?

    from the given information the dividend model is to be used

    P = D1/r-g

    42.70 = 3.80/r-0

    42.70r = 3.80

    r = 3.80/42.70

    r = 0.8899/8.90%
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