Which of the Following Statements Is CORRECT

question 29

Multiple Choice

Which of the following statements is CORRECT?

• A) Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm's common stock, and, as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common stock.
• B) The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase (on a pro rata basis) new issues of preferred stock.
• C) One of the disadvantages to a corporation of owning preferred stock instead of owning bonds is that 50% of the preferred dividends received represent taxable income to the corporate recipient, whereas none of the interest received from bonds is taxable income to the corporate recipient.
• D) One of the advantages for a firm financing with preferred stock is that 50% of the dividends the firm pays may be deducted from its taxable income.
• E) A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.

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Definitions:

Eosin/o

A prefix relating to eosinophils, a type of disease-fighting white blood cell, often associated with allergic reactions and infections.

Erythr/o

A prefix used in medical terms to denote a relation to red or red blood cells.

Hemat/o

A prefix relating to blood.

Septicemia

A serious bloodstream infection that can lead to sepsis, a potentially life-threatening condition.