1. If a company does issue a residual dividend, is that a good or bad sign for the company? Should a company always have "other satisfactory opportunities and sources of investment of funds available" or is it ok to issue the dividends?
2. Barton Industries can issue perpetual preferred stock at a price of $41 per share. The stock would pay a constant annual dividend of $2.50 per share. If the firm's marginal tax rate is 40%, what is the company's cost of preferred stock? Round your answer to 2 decimal places.