Reference no: EM133063856

Questions -

Q1. A firm's preferred stock pays an annual dividend of $4, and the stock sells for $89. Flotation costs for new issuances of preferred stock are 5% of the stock value. What is the after-tax cost of preferred stock if the firm's tax rate is 38%?

Q2. Five rights are necessary to purchase one share of Fogel stock at $46. A right sells for a $5. The ex-rights value of Fogel stock is_______.

Q3. Tricki Corp stock sells for $65 rights-on, and the subscription price is $55. Ten rights are required to purchase one share. Tomorrow the stock of Tricki will go ex-rights. What is Tricki's expected price when it begins trading ex-rights?

Q4. Kuhns Corp. has 190,000 shares of preferred stock outstanding that is cumulative and 100,000 common stock outstanding. The preferred dividend is $7.00 per share and has not been paid for 3 years. If Kuhns earned $1.40 million this year, what could be the maximum payment to the preferred stockholders on a per share basis?

Q5. Buggy Whip Manufacturing Company is issuing preferred stock yielding 18%. Selten Corporation is considering buying the stock. Assume that Buggy's tax rate is 0% due to continuing heavy tax losses, and Selten's tax rate is 30%. What is the after-tax preferred yield for Selten? Assume the tax rate on dividends is 15%.