A company’s perpetual preferred stock currently trades at $80 per share and pays a $6.00 annual dividend per share. If the company were to sell a new preferred issue, it would incur a flotation cost of 4%. What would the cost of that capital be?

Question

A company’s perpetual preferred stock currently trades at $80 per share and pays a $6.00 annual dividend per share.  If the company were to sell a new preferred issue, it would incur a flotation cost of 4%.  What would the cost of that capital be?

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