Jensen\'s Travel Agency has 8 percent preferred stock outstanding that is curren

Question

Jensen's Travel Agency has 8 percent preferred stock outstanding that is currently selling for $38 a share. The market rate of return is 15 percent and the firm's tax rate is 34 percent. What is Jensen's cost of preferred stock?

5.28 percent

7.16 percent

39.47 percent

6.89 percent

21.05 percent

Jensen's Travel Agency has 8 percent preferred stock outstanding that is currently selling for $38 a share. The market rate of return is 15 percent and the firm's tax rate is 34 percent. What is Jensen's cost of preferred stock?

Explanation / Answer

Interest rate 8% Less: 34% tax 2.72% Interest after Tax 5.28% Answer: 5.28%

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