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30 August, 02:09

Torch Industries can issue perpetual preferred stock at a price of $56.00 a share. The stock would pay a constant annual dividend of $7.00 a share. What is the company's cost of preferred stock, rp

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  1. 30 August, 03:22
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    Cost of preferred stock = 12.5 %

    Explanation:

    A preferred stock entitles its owner to a fixed amount of dividend. It is calculated as follows:

    Cost of preferred stock = (Preference dividend/stock price) * 100

    Cost of preferred stock = 7/56 * 100 = 12.5 %

    Cost of preferred stock = 12.5 %
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