Qusetion: ABC is planning on issuing $20 million securities in bonds and $20 million in preferred stock. Current Preferred Stock price $48 Preferred Dividends $3.00 Preferred Dividends of $3.00 per share are likely to paid regularly in the future Bond $1000 face value; term 20 years; interest rate 4.5%
Flotation Costs
Flotation cost 6% for both issues
ABC tax rate 33%
What is the cost of preferred stock to ABC after taxes and taking flotation costs into account?