A Firm Is Paying an Annual Dividend of $3

question 20

Multiple Choice

A firm is paying an annual dividend of $3.63 for its preferred stock which is selling for $62.70.There is a selling cost of $3.30.What is the after tax cost of preferred stock if the firm's tax rate is 33%?

• A) 2.02%
• B) 4.09%
• C) 5.79%
• D) 6.11%

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Definitions:

Organic Molecules

Compounds primarily made of carbon atoms, often containing hydrogen, oxygen, and other elements, that are the basis of life.

Weak Base

A base that partially dissociates into its ions in an aqueous solution, resulting in a weakly alkaline solution, as opposed to a strong base which fully dissociates.

Strong Base

A substance that can readily accept hydrogen ions and is completely or nearly completely dissociated in aqueous solution, resulting in a high pH.

Sudan IV

A lysochrome (fat-soluble dye) used in histology to stain lipids, triglycerides, and lipoproteins in cells and tissues.