Libby has bought 100 preferred stocks of alexis ltd. this year, alexis ltd. paid a dividend of $2.50 per share. the price of each preferred share is $15. what is the cost of preferred equity?

to calculate the cost of preferred equity, you need to use the following formula:

rps  = dps/pnet

where: dps = preferred dividends pnet = net issuing price

substituting the given in the formula, you can get the following:

  $2.50/$15 = 16.67%