Problem:
Cost of Preferred Stock Including Flotation
Trivoli Industries plans to issue perpetual preferred stock with an $11.00 dividend. The stock is currently selling for $99.50; but flotation costs will be 5% of the market price, so the net price will be $94.53 per share.
Required:
Question: What is the cost of the preferred stock, including flotation? Elucidate comprehensively and provide all workings and methods.