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Business, 20.11.2019 23:31 JJJuliedavis

Consider the case of purple lemon fruit company: ten years ago, purple lemon fruit company issued a perpetual preferred stock issue-called ps alpha-that pays a fixed dividend of $6.50 per share and currently sells for $100 per share. purple lemon's management team is considering issuing a second issue of perpetual preferred stock. if the new issue tentatively called ps beta-is actually sold, the company will incur an underwriting (or flotation) cost of 4.70%. in addition, the underwriters are anticipating the need to pay a dividend of $17.50 per share to attract new investors, and is expecting to sell the new shares for $95.00 per share as a component in purple lemon's weighted average cost of capital, ps alpha shares currently exhibit a cost of: 4.88% 8.13% o 7.48% 6.50%

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