Tempo corp will issue preferred stock to finance a new, Ask an Expert

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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%

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92057223

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