Question by  roxiee (98)

What is the cost of preferred stock calculation?

I need to know more about preferred stock calculation.


Answer by  rejoice (216)

Simple! Price = dividend/ yield. Yield = required rate of return Dividend = dividend rate x par value Convert all percentages to numbers and make sure you get the statistics from reliable sources.

Reply by enlightened (206):
A good stock brokerage account will tell all these figures easily and accurately.  add a comment

Answer by  theblip (295)

Preferred Stock has both debt and common stock components. You can get dividends for it like common stock but the dividends are fixed. So it is predictable and can be calculatable. You need the par value, the preferred dividend rate, calculate the preferred dividend, get the yield.

Reply by addicted (186):
Just to add on. Par value is the claim of the preferred stockholder against the value of the firm.  add a comment

Answer by  ThomasGray (31)

The preferred stock price is mathematically derived by dividing the the preferred dividend by the required return on the stock. The formula is Pp=Dp/r.

Reply by icyblue (236):
I assume that Pp is Preferred Stock Price, Dp is preferred Dividend and r is Required Return.  add a comment

Answer by  Vanasatchy (816)

The cost of preferred stock calculation you must find the sum of. The cost od debit Cost preffered stock Cost of equity. To derive the cost of capital each of its components must be calculated.

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