QUESTION 14 ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing preferred stock? O a. 1% O b.6.5% Oc. 11% O d.9% QUESTION 15 Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock. O a. 5.6% Ob.3.8% O c.7% Od.4.6%
QUESTION 14 ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing preferred stock? O a. 1% O b.6.5% Oc. 11% O d.9% QUESTION 15 Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock. O a. 5.6% Ob.3.8% O c.7% Od.4.6%
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 15PROB
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Please answer only 14 without image thnx
![QUESTION 14
ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred
stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share
is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing
preferred stock?
a. 1%
b.6.5%
Oc. 11%
Od.9%
QUESTION 15
Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of
issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock.
O a. 5.6%
Ob.3.8%
OC. 7%
Od.4.6%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1ef3ad37-f77e-4b09-af89-0307cd0bf3be%2F15270e28-2353-44d9-84ff-89605f565a24%2Fz3h6lt_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION 14
ABC Entity has $4.5M of capital which consists of debt, common stock, retained earnings, and preferred stock. The total preferred
stock is $500,000 which is composed of 10,000 shares with a par value of $50 each. The current market value of each preferred share
is $55. ABC pays preferred shareholders a 10% dividend on the par value each year. ABC's tax rate is 21%. What is the cost of existing
preferred stock?
a. 1%
b.6.5%
Oc. 11%
Od.9%
QUESTION 15
Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of
issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock.
O a. 5.6%
Ob.3.8%
OC. 7%
Od.4.6%
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