Answer:
r = 0.1 or 10%
Explanation:
The cost of capital of a preferred stock can be calculated by dividing the amount of dividend paid or payable by the preferred stock by the price of the preferred stock. The amount of dividend paid by the preferred stock is always constant. The formula for cost of capital for preferred stock is as follows,
r = Dividend / Price
Where,
- r is the cost of preferred stock
r = 5 / 50
r = 0.1 or 10%
