If Investors Require a 10% After-Tax Return from a Firm's

question 39

Multiple Choice

If investors require a 10% after-tax return from a firm's preferred stock and its dividend is $5.00 per share,what is the price per share assuming a marginal tax rate of 25% and no flotation costs?

• A) $50.00
• B) $12.50
• C) $37.50
• D) $18.75
• E) $20.00

---

Definitions:

Decision Making

The method of selection by recognizing a decision, assembling data, and examining various alternatives.

Goal Clarity

The extent to which the objectives or desired outcomes of a task or project are clearly defined and understood.

Goal-path Clarity

signifies the clear understanding of the objectives to be achieved and the specific methods or steps required to reach those goals.

Cohesive

The degree to which members of a group are attracted to, and motivated to remain part of, that group, often leading to increased solidarity and group effectiveness.