What is the relevant cost of new preferred stock

Reference no: EM13273974

Tempo Corp. will issue preferred stock to finance a new artillery line. The firm's existing preferred stock pays a dividend of $4.00 per share and is selling for $40 per share. Investment bankers have advised Tempo that flotation costs on the new preferred issue would be 5% of the selling price. Tempo's marginal tax rate is 30%. What is the relevant cost of new preferred stock? A. 10.00% B. 7.37% C. 10.53% D. 15.00% E. 7.00%

Reference no: EM13273974

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