QUESTIONS 69 THROUGH 78 RELATE TO CORPORATE FINANCE

74. A company plans to issue nonconvertible, noncallable, fixed-rate perpetual

preferred stock with a $6 annual dividend. The preferred stock is expected to sell

for $40. If the company’s marginal tax rate is 30 percent, then the cost of

preferred stock is closest to:

A. 6.67%.

B. 10.5%.

C. 15.0%.

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