Question: how to calculate the cost of preferred stock with flotation costs?
Answer: Solution: Fixed dividend = $60 x 6% = $3.6 Net proceeds = Market price – Floatation costs = $70 – (5% of $70) = $66.5 Cost of preferred stock (r ps ) = Fixed dividend/Net proceeds = $3.6/$66.5 = 5.41% r ps = 5.41% 9-5 Cost of Equity DCF: Summerdahl Resort's common stock is currently trading at $36 a share.