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Problem:

Ross's preferred stock currently sells for $90 per share and pays a dividend of $10 per share. However, the firm will only receive $80 per share from the sale of new preferred stock due to the floatation costs.

Required:

Question: What's the firm's component cost of Preferred stock?

A. 9.5%

B. 10.0%

C. 12.5%

D. 13.6%

Note: Please explain comprehensively and give step by step solution.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91148411

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