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borteleto borteleto
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Posts: 2477
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5 years ago
Tempo Corp. will issue preferred stock to finance a new artillery line. The firm's existing preferred stock pays a dividend of $4.00 per share and is selling for $40 per share. Investment bankers have advised Tempo that flotation costs on the new preferred issue would be 5% of the selling price. Tempo's marginal tax rate is 30%. What is the relevant cost of new preferred stock?
A) 7.00%
B) 7.37%
C) 10.00%
D) 10.53%
E) 15.00%
Textbook 
Foundations of Finance

Foundations of Finance


Edition: 9th
Authors:
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