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22 March, 03:08

Bethesda Water has an issue of preferred stock outstanding with a coupon rate of 5.60 percent that sells for $95.34 per share. If the par value is $100, what is the cost of the company's preferred stock

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  1. 22 March, 04:30
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    5.87%

    Explanation:

    The computation of the cost of preferred stock is shown below:

    Cost of preferred stock = Annual dividend : Price of preferred stock per share

    where,

    Annual dividend is

    = Coupon rate * par value of the share

    = 5.60% * $100

    = $5.6

    And, the price of preferred stock per share is $95.34

    So, the cost of the company preferred stock is

    = $5.6 : $95.34

    = 5.87%
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