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Tempo Corp will issue preferred stock to finance a new artillery line The firms existing preferred stock pays a dividend of 400 per share and is selling for 30 per share Investment bankers have

Tempo Corp. will issue preferred stock to finance a new artillery line. The firm's existing preferred stock pays a dividend of $4.00 per share and is selling for $30 per share. Investment bankers have advised Tempo that flotation costs on the new preferred issue would be 4% of the selling price. Tempo's marginal tax rate is 30%. What is the relevant cost of new preferred stock?

Select one:

a. 10.00%

b. 10.53%

c. 13.89%

d. 7.00%

 

Aug 24 2020 View more View Less

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