Calculate the after-tax cost of preferred stock for Bozeman-Western Airlines, Inc., which is planning to tell $10 million of $4.50 cumulative preferred stock to the public at a price of $48 a share. The company have a marginal tax rate of 40 percent.
Answers: Unless I am mistaken, which I frequently am, the import tax rate does not enter into the calculation since dividends are salaried with after charge dollars unlike interest expense which is paid beside before excise dollars. However some preferred stock is actually considered a debt instrument fairly than an equity instrument. I have to assume the preferred stock is not classified as a debt instrument.
Unfortunately, $48 a share does not divide equally into $10,000,000. I hold to assume that they actually issued 208,333 shares or $9,999,984 worth.
208,333 x 4.50 = $937,498.50
I contemplate that is the answer.
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Answers: Unless I am mistaken, which I frequently am, the import tax rate does not enter into the calculation since dividends are salaried with after charge dollars unlike interest expense which is paid beside before excise dollars. However some preferred stock is actually considered a debt instrument fairly than an equity instrument. I have to assume the preferred stock is not classified as a debt instrument.
Unfortunately, $48 a share does not divide equally into $10,000,000. I hold to assume that they actually issued 208,333 shares or $9,999,984 worth.
208,333 x 4.50 = $937,498.50
I contemplate that is the answer.
Resolved Questions: