Jiffy wax Corp. can sell common stock for $15 per share andits investore require

Question

Jiffy wax Corp. can sell common stock for $15 per share andits investore require a 14% return. However, theadministrative of flotation costs associated with selling the stockamount to $2.40 per share What is the cost of capital for jiffy waxif the corporation raises money by selling preferred stock? Jiffy wax Corp. can sell common stock for $15 per share andits investore require a 14% return. However, theadministrative of flotation costs associated with selling the stockamount to $2.40 per share What is the cost of capital for jiffy waxif the corporation raises money by selling preferred stock?

Explanation / Answer

kp=d/vp-f d=14 vp=15 f=2.4 hence kp=14/(15-2.4) kp=5.83%

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