Cost of preferred stock
Cost of preferred stock, rps is the return required by the firm's preferred stockholders. The cost of preferred stock, rps, is the cost to the firm of issuing new preferred stock. For perpetual preferred, it is the preferred dividend, Dps, divided by the net issuing price, Pn.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Cost of preferred stock, rps. The return required by the firm's preferred stockholders. The cost of preferred stock, rps, is the cost to the firm of issuing new preferred stock. For perpetual preferred, it is the preferred dividend, Dps, divided by the net issuing price, Pn.
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Cost of preferred stock, rp. The rate of return investors require on the firm's preferred stock; rp is calculated as the preferred dividend, Dp, divided by the current price, Pp.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
