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St. Joe Trucking has sold an issue of $6 cumulative preferred stock to the public at a price of $60 per share. After issuance costs, St. Joe netted $57 per share. The company has a marginal tax rate of 40 percent.

a. find out the after-tax cost of this preferred stock offering assuming that this stock is a perpetuity.

b. if the stock is callable in 5 years at $66 per share and investors expect it to be called at that time, what is the after-tax cost of this preferred stock offering?

(Compute to the nearest whole percent.)

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M944020

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