12.82 times
0.1282 times
12.82%
Rs 12.82
Answer is Right!
Answer is Wrong!
The correct answer is C. 12.82%.
The component cost of preferred stock is the rate of return that a company must earn on its preferred stock in order to satisfy its investors. It is calculated by dividing the annual dividend per share by the price per share, plus the flotation cost as a percentage of the price per share.
In this case, the dividend per share is Rs 15, the price per share is Rs 120, and the flotation cost is Rs 3.0. Therefore, the component cost of preferred stock is:
(15 / 120) + (3 / 120) * 100 = 12.82%
The other options are incorrect because they do not take into account the flotation cost.