. Bosio Inc.'s perpetual preferred stock sells for $85.00 per share, and it pays an $8.50 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 4.00% of the price paid by investors. What is the company's cost of preferred stock for use in calculating the WACC

$10.42%

Explanation:

The company's cost of preferred stock for use in calculating the WACC can be derived using the dividend valuation model because it is same as calculating the cost of equity with slight modification.

Dividend valuation model: Kp = Do / Po (ex dividend)

where:

Kp = Cost of Preference shares

Do = current dividend

Po = Price of shares

Note that the flotation cost has to be adjusted against the price of the shares

Hence Kp = $8.5 / $85 (100% - 4%) = 0.104166

Hence, The company's cost of preferred stock for use in calculating the WACC is 10.42%

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know