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What is the firm component cost of preferred stock

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Reference no: EM132823641

Problem 1: A firm's preferred stock currently sells for $90 per share and pays a dividend of $10 per share. However, the firm will pay $5 per share floatation costs for the sale of new preferred stock. What's the firm's component cost of Preferred stock?

Option 1: 9.8%

Option 2: 10.9%

Option 3: 11.8%

Option 4: 12.5%

Reference no: EM132823641

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