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Author Question: Toto and Associates' preferred stock is selling for 27.50 a share. The firm nets 25.60 after ... (Read 21 times)

magmichele12

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on: Jul 10, 2018
Toto and Associates' preferred stock is selling for 27.50 a share. The firm nets 25.60 after issuance costs. The
  stock pays an annual dividend of 3.00 per share. What is the cost of existing, and new, preferred stock
  respectively?
 
  What will be an ideal response?

Question 2

What is the yield to maturity of a bond that pays an 5 coupon rate with annual coupon payments,
  has a par value of 1,000, matures in 15 years, and is currently selling for 769?
 
  A) 5.7 B) 7.6 C) 9.5 D) 2.4
Foundations of Finance ¦ Keown, Petty, Martin ¦ 9th Edition
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bitingbit

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Cost of existing preferred stock = 3.00/27.50 = 10.91
Cost of new preferred stock = 3.00/25.60 = 11.72

Answer to Question 2

B


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