Raising new capital by using preferred stock

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Reference no: EM13944605

Test Developer, Inc. (TDI) is raising new capital by using preferred stock. Its investment bankers have estimated that if the company pays a dividend of $9 per share on the new preferred stock, it can sell new preferred stock at $90 per share. They have estimated that the cost of selling the new preferred stock will be $2.40 per share. What is the company’s after-tax cost of preferred stock for this new financing if its tax rate is 30 percent?

Reference no: EM13944605

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