Author Question: Jensen's Travel Agency has a 7 percent preferred stock outstanding that is currently selling for $48 ... (Read 36 times)

NguyenJ · **on:** Apr 25, 2021

Question 1

If investors require a 10% after-tax return from a firm's preferred stock and its dividend is $5.00 per share, what is the price per share assuming a marginal tax rate of 25% and no flotation costs?
◦ $50.00
◦ $12.50
◦ $37.50
◦ $18.75
◦ $20.00

Question 2

Jensen's Travel Agency has a 7 percent preferred stock outstanding that is currently selling for $48 a share. The preferred stock has a $100 par value. The market rate of return is 10 percent and the firm's tax rate is 34 percent. What is the Jensen's cost of preferred stock?
◦ 8.75 percent
◦ 9.62 percent
◦ 11.98 percent
◦ 13.25 percent
◦ 14.58 percent

flexer1n1 · **Reply #1 on:** Apr 25, 2021

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