ABC Company has publicly traded $1,000 par value, 7% semiannual coupon bonds which mature in...
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Finance
ABC Company has publicly traded $1,000 par value, 7% semiannual coupon bonds which mature in 18 years. These bonds have a current market price of $1015. The company also has preferred stock with a $75 par and 8% annual dividend. The market has priced the preferred stock at $104. ABCs common stock has a beta of 1.5. You estimate the risk-free rate to be 4% and the required return on the market to be 15%. The companys average tax rate is 30%.
What is the cost of the companys preferred stock?
Group of answer choices
5.32%
5.77%
6.61%
4.98%
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