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What is the? after-tax cost of the preferred? equity

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Reference no: EM133002012

Problem 1: When evaluating a? project, a? firm's managers should select projects whose cash? flows:

a) have the lowest NPVs after discounting cash flows by the? project's capital cost
b) produce higher returns than the? firm's average cost of capital
c) result in a return that exceeds the cost of funds to finance the project
d) exceed some target cash flow level set by management

Problem 2: What is the? after-tax cost of the following preferred? equity? The par value of the preferred share is ?$100 and the annual dividend is 6?%. The preferred shares have no stated maturity. The current market price of the share is ?$70. Assume that the corporate tax rate is 30?%.

A) 9.58%
b) 8.10%
c) 6%
d) 8.57%

Reference no: EM133002012

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