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Calculate the after-tax cost of this preferred stock
Course:- Finance Basics
Reference No.:- EM13298443




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St. Joe Trucking has sold an issue of $6 cumulative preferred stock to the common 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. Calculate the after-tax cost of this preferred stock offering assuming that this stock is a perpetuity.

b. If the stock is callable in five years at $66 per share and investors expect it to be called at the time, what is the after-tax cost of this preferred stock offering? (Compute to the nearest whole percent.)

 




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