What is the cost preferred stock financing

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Reference no: EM13868486

The preferred stock of gator industries sells for $35.66 and pays $2.74 per year in dividends. What is the cost preferred stock financing? If Gator were to issue 470,000 more preferred shares just like the ones it currently has outstanding, it could sell them for $35.66 a share but would incur flotation of $2.95 per share. What are the flotation costs for issuing the preferred shares and how should this cost be incorporated into the NPV of the project being financed?

The firm’s cost of preferred stock financing is____% (Round to two decimals places.)

The flotation costs adjusted initial outlay for issuing the preferred shares are $______ (Round to the nearest dollars

How should this cost be incorporated into the NPV of the project being financed?

a) We can account for flotation cost when calculating NPV by adding them to the initial project outlaw.

b) We can account for flotation cost when calculating NPV by subtracting them from the initial project outlay

c) We can account for flotation costs when calculating NPV by adjusting the project’s discount rate

d) We can account for flotation cost when calculating NPV by issuing more shares than initially anticipated.

Reference no: EM13868486

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