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Estimating the Cost of Preferred Stock

Cost of preferred stock is the cost that the company has committed to pay to the preferred stockholders in the form of preferred dividends. For a plain vanilla preferred stock (No convertibility or callable features), the cost is calculated as follows: Cost of preferred stock, Where, D = Preferred stock dividend per share P =

Issues in Estimating Cost of Debt

We discussed that the cost of debt for a company can be measured using the YTM or Debt-Rating approach. An analyst faces certain issues while estimating the cost of debt. These issues are discussed below: Floating/Fixed Rate Debt: In our previous article, our calculations assumed a fixed rate for debt. However, in reality, a firm