Corporate Finance Q94

94A company’s $100 par value preferred stock with a dividend rate of 15.0% per year is currently priced at $105.85 per share. The company's earnings are expected to grow at an annual rate of 3% for the foreseeable future. The cost of the company’s preferred stock is closest to:

Option : C
Explanation : Rp = Dp / Pp (or Dividend / Price) = ($100 * 0.15) / $105.85 = 14.17%.

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