Jumbo Juice's preferred stock pays a constant dividend equal to $4.75 per share. The firm's marginal tax rate is 40 percent. Jumbo Juice incurs a 5 percent flotation cost each time it issues preferred stock.
(a) If the firm issues 10,000 shares of preferred stock at $50 per share, how much of the total value of the issue will the firm be able to use (receive)?
(b) What is Jumbo Juice's cost of preferred stock?