Q417
Preferred dividend is divided by preferred stock price multiply by (1-floatation cost) is used to calculate
A.
transaction cost of preferred stock
B.
financing of preferred stock
C.
weighted cost of capital
D.
component cost of preferred stock
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
Preferred dividend is divided by preferred stock price multiply by (1-floatation cost) is used to calculate component cost of preferred stock. Cost of preferred stock is the rate of return required by holders of a company's preferred stock. It is calculated by dividing the annual preferred dividend payment by the preferred stock's current market price.