What is the company’s cost of preferred stock for use in calculating the WACC?

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What is the company’s cost of preferred stock for use in calculating the WACC?

Finance Basics

Hettenhouse Company’s perpetual preferred stock sells for $102.50 per share, and it pays a $9.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company’s cost of preferred stock for use in calculating the WACC?

a. 9.27%
b. 9.65%
c. 10.04%
d. 10.44%
e. 10.86%

 

 

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