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The preferred stock of Nadine Fashions pays an annual dividend of $2.25 a share and sells for $38.75 a share. The tax rate is 32 percent. What is the firm's cost of preferred stock? 9.5% 7.26% 8.39% 5.81% 10.14%

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  1. Today, 21:09
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    The cost of preferred stock is 5.81%

    Explanation:

    Hi, well, the cost of a preferred stock follows this formula.

    R (p) = Div/P

    where:

    Div: Dividend of the preferred stock

    P: Price of the preferred stock

    therefore, the cost of the preferred stock would be.

    R (p) = 2.25/38.75 = 5.81%

    Best of luck
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