The cost of preferred stock is equal to: A) the preferred stock dividend by its par value. B) the preferred stock dividend divided by market price net of flotation costs. C) preferred stock dividend multiplied by the net market price. D) [(1-tax rate) times the preferred stock dividend] divided by [the net price]. By elimination B seems correct and infact B is the answer But what is this floating cost thing here, wasn’t there is the formula quoted in the book. Can anyone help here?
“flotation costs” and “floating costs” are different… flotation means the issuing of preferred stock.
That was a stupid mistake. Thanks…doubt cleared.