Problem:
Holdup Bank has an issue of preferred stock with a $8 stated dividend that just sold for $86 per share.
Required:
Question: What is the bank's cost of preferred stock?
Hint: The price of any asset is the present value of future cash flows. The preferred stock has a constant dividend, and is perpetuity. Use the present value equation for perpetuity to figure out the required return on the preferred stock
Note: Can someone please give me a step by step solution?