A firm has issued 10 percent preferred stock, which sold for $100 per share par value. The cost of issuing and selling the stock was $2 per share. The firm’s marginal tax rate is 40 percent. The cost of the preferred stock is
A. 3.9 percent.
B. 6.1 percent.
C. 9.8 percent.
D. 10.2 percent.
Answer:D
A firm has issued 10 percent preferred stock, which sold for $100 per share par value. The cost of issuing and selling the stock was $2 per share. The firm’s marginal tax rate is 40 percent. The cost of the preferred stock is
A. 3.9 percent. B. 6.1 percent. C. 9.8 percent. D. 10.2 percent.