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Question
Beige Inc. plans to issue preferred stock that pays a dividend equal to $11.52 per share and sells for $120 per share to raise funds to support future growth. It will cost 4 percent, or $4.80 per share, to issue the new preferred stock, which means that Beige will net $115.20 per share. What is the cost of preferred stock Beige should use when computing its weighted average cost of capital (WACC)?
a. 14.0%
b. 10.4%
c. 13.6%
d. 9.6%
e. 10.0%
Answer
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