Question

A firm has preferred stock that pays an 8 percent dividend on a $75 par value. If a new issue is offered, flotation costs will be 3 percent of the current market price of $80. The firm's marginal tax rate is 35 percent. What is the firm's cost of preferred stock financing

Answer 1

The company's fee for preferred stock financing is Annual dividend=75*8%=$6

Stock financing is the proper choice for organizations whose modern assets in large part include warehouse inventory. stock financing permits a company to efficaciously control its circulating capital and to enhance coins glide. the security for warehouse financing is new motors that are bought, in inventory, or in transit.

Common stock financing increases the borrowing capacity of the company. due to the fact, that commonplace stock gives a cushion in opposition to losses of creditors, the sale of not unusual inventory typically increases the credit score worthiness of the company.

Debt financing happens whilst an employer raises money through promoting debt contraptions to traders. Debt financing is the other of equity financing, which entails issuing stock to raise cash. Debt financing happens while a company sells fixed-income products, along with bonds, payments, or notes.

Learn more about stock financing here: https://brainly.com/question/25572872

#SPJ1