The Cost of Perpetual Preferred Stock Is Found as the Preferred's

question 14

True/False

The cost of perpetual preferred stock is found as the preferred's annual dividend divided by the market price of the preferred stock.No adjustment is needed for taxes because preferred dividends,unlike interest on debt,are not deductible by the issuing firm.

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Definitions:

Riskier

Characterized by or involving higher levels of risk; more uncertain or liable to result in adverse outcomes compared to alternatives.

Not-Invented-Here Bias

The tendency to ignore or harbor negative attitudes toward ideas from outside one’s own organization or project team.

Implement

To put into action or execute a plan, process, or instruction.

Expected Value

A statistical concept that calculates the anticipated value of an investment, decision, or outcome over time, considering all possible scenarios.