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Component cost of preferred stock

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Lei-Feng, Inc.'s $100 par value preferred stock just paid its $10 per share annual dividend. The preferred stock has a current market price of $96 a share. The firm's marginal tax rate (combined federal and state) is 40 percent, and the firm plans to maintain its current capital structure relationship into the future. The component cost of preferred stock to Lei-Feng, Inc. would be closest to.

a) 6 percent

b) 6.25 percent

c) 10 percent

d) 10.4 percent

Reference no: EM131068144

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