Cost of Preferred Stock

The cost of preferred stock is the rate of return required by investors in exchange for investing in preferred shares. It is calculated by dividing the annual preferred dividend by the market price of the preferred stock. This cost is a critical component of a company's overall cost of capital, particularly when assessing financing options and making capital structure decisions.

• Rate of return required for preferred share investments.
• Calculated using dividends and market price.
• Key component of a company's cost of capital.
• Important in financing decisions.