Problem:
Jensen's Travel Agency has a 5 percent preferred stock outstanding that is currently selling for $58 a share. The market rate of return is 8 percent and the firm's tax rate is 33 percent.
Required:
Question: What is Jensen's cost of preferred stock?
- 5.17 percent
- 8.62 percent
- 7.83 percent
- 7.08 percent
- 5.69 percent
Note: Please show how to work it out.