Wallace Container Company issued $100 par value preferred stock 10 years ago. Th
ID: 2750530 • Letter: W
Question
Wallace Container Company issued $100 par value preferred stock 10 years ago. The stock provided a 5 percent yield at the time of issue. The preferred stock is now selling for $60.
What is the current yield or cost of the preferred stock? (Disregard flotation costs.) (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)
Wallace Container Company issued $100 par value preferred stock 10 years ago. The stock provided a 5 percent yield at the time of issue. The preferred stock is now selling for $60.
Explanation / Answer
Cost of preferred stock is Annual Dividend / Current Market Price
Annual diviended is 5% of 100 =$5
Current market price $60
Hence Cost of preferred stock is 5/60 = 0.0833 = 8.33%
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