Jensen’s Travel Agency has a 7 percent preferred stock outstanding tha

Jensen’s Travel Agency has a 7 percent preferred stock outstanding that is currently selling for $48 a share. The preferred stock has a $100 par value. The market rate of return is 10 percent and the firm’s tax rate is 34 percent.

What is the Jensen’s cost of preferred stock?
A) 8.75 percent
B) 9.62 percent
C) 11.98 percent
D) 13.25 percent
E) 14.58 percent

ANSWER

E