Which of the Following Statements Is CORRECT

question 10

Multiple Choice

Which of the following statements is CORRECT?

• A) A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.
• B) 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.
• C) 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.
• D) One of the disadvantages to a corporation of owning preferred stock is that 70% of the dividends received represent taxable income to the corporate recipient, whereas interest income earned on bonds would be tax free.
• E) One of the advantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.

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Definitions:

Magnetic Field

A vector field that describes the magnetic influence on moving electric charges, electric currents, and magnetic materials.

Gyromagnetic Ratio

A constant for a given nucleus that relates its magnetic moment and angular momentum, important in NMR and MRI.

Proton Resonance

A nuclear magnetic resonance (NMR) technique used to determine the structure of organic compounds by observing the behavior of hydrogen nuclei in a magnetic field.

O-Chlorophenol

A type of chlorophenol with the chlorine atom bonded to the ortho position (adjacent to) of the hydroxyl group on the benzene ring.