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

question 71

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, is not deductable by the issuing firm.

---

Definitions:

Par Value

The face value of a bond or share of stock as stated on the certificate, which is not necessarily indicative of the market value.