Calculate cost of the preferred shares

Reference no: EM13200425

Cost of preferred equity Taylor Systems has just issued preferred shares. The shares have a 12 percent annual dividend and a $100 stated value and were sold at $97.50 per share. In addition, flotation costs of $2.50 per share must be paid.

a. Calculate the cost of the preferred shares. What is the after-tax cost of the preferred shares?

b. If the firm sells the preferred stock with a 10 percent annual dividend and nets $90 after flotation costs, what is its cost?

Reference no: EM13200425

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