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23 Nov 2019

(Cost of preferred stock) The preferred stock of WalterIndustries Inc. currently sells for $35.67 a share and pays $3.49in dividends annually. What is the firm's cost of capital for thepreferred stock?

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Deanna Hettinger
Deanna HettingerLv2
2 Aug 2019
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Related questions

Raphael Corporation’s common stock is currently selling on astock exchange at $154 per share, and its current balance sheetshows the following stockholders’ equity section: Preferredstock—5% cumulative, $___ par value, 1,000 shares authorized,issued, and outstanding $ 50,000

Common stock—$___ par value, 4,000 shares authorized, issued,and outstanding 80,000

Retained earnings 300,000

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PROBLEM 3

Timber Ridge Corporationwas organized on January 1, 2013. During its first year, thecorporation issued 40,000 shares of $5 par value preferred stockand 400,000 shares of $1 par value common stock. At December 31,the company declared the following cash dividends:

2013 $ 8,000

2014 $30,000

2015 $70,000

Instructions

(a) Showthe allocation of dividends to each class of stock, assuming thepreferred stock dividend is 5% and not cumulative.

(b) Showthe allocation of dividends to each class of stock, assuming thepreferred stock dividend is 6% and cumulative.

(c) Journalize the declaration of the cashdividend at December 31, 2015 using the assumption of part(b).

(a) Preferred Common Total

2013

2014

2015

(b) Preferred Common Total

2013

2014

2015

(c)

Date

Account

Debit

Credit

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