Defense Electronics, Inc. (DEI), a large publicly traded firm is the market share leader in radar detection systems (RDSs), has asked you to compute the cost of preferred stock for the firm. The cost of preferred stock is equivalent to the required return to preferred stockholders. Using the information provided below, compute the firm’s cost of preferred stock and the total market value of the firm’s preferred stock. Preferred Stock: 450,000 shares of 5 percent preferred stock outstanding, selling for $81 per share

    Number of uncollected gratification distributes = 450,000

    Selling cost per distribute = $81

    Dividend blame per distribute = 5%

    Dividend per distribute = 0.05*100 = $5 (it is productive that the face estimate of gratification distribute is $100)

    Cost of preferred fund = 5/81 = 0.0617 = 6.17%

    Total bargain estimate of preferred fund = 81*450,000

    = $36,450,000