What is the relevant cost of new preferred stock

Reference no: EM131303739

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%

Reference no: EM131303739

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