Cost of Preferred Stock Calculator

Written by CFI Team

Read Time 2 minutes

Over 2.8 million + professionals use CFI to learn accounting, financial analysis, modeling and more. Unlock the essentials of corporate finance with our free resources and get an exclusive sneak peek at the first module of each course. Start Free

Cost of Preferred Stock Calculator

This cost of preferred stock calculator shows you how to calculate the cost of preferred stock given the dividend, stock price, and growth rate.

Below is a screenshot of the cost of preferred stock calculator:

Cost of Preferred Stock Calculator Screenshot

Download the Free Template

The cost of preferred stock to the company is effectively the price it pays in return for the income it gets from issuing and selling the stock. In other words, it’s the amount of money the company pays out in a year divided by the lump sum they got from issuing the stock.

Management often uses this metric to determine what way of raising capital is most effective and efficient. Corporations can issue debt, common shares, preferred shares, and a number of different instruments in order to raise funds for expansions or continuing operations. They calculate the cost of the preferred stock formula by dividing the annual preferred dividend by the market price per share. Once they have the rate, they can compare it to other financing options. The cost of preferred stock is also used to calculate the Weighted Average Cost of Capital.

More Free Templates

For more resources, check out our business templates library to download numerous free Excel modeling, PowerPoint presentations, and Word document templates.