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What will be the cost of the newly issued preferred shares

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Problem 1: Seven Eleven Stores is planning an expansion project that it desires to finance with newly issued preferred stock. The firm has an outstanding issue of preferred stock that pays a dividend of $4.25 per share, which is trading for $65 per share. The investment bankers have advised Seven Eleven that flotation costs will be 8% per share. What will be the cost of the newly issued preferred shares?

Option 1. 8.3%

Option 2. 7.1%

Option 3. 9.7%

Option 4. 6.5%

Reference no: EM132643612

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