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Calculate the after-tax cost of a preferred stock

Problem:

Calculate the after-tax cost of a preferred stock for Bozeman-Western Airlines, Inc., which is planning to sell $10 million of $4.50 cumulative preferred stock to the public at a price of $48 a share. The company has a marginal tax rate of 40 percent.

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Accounting Basics: Calculate the after-tax cost of a preferred stock

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