Which of the Following Is NOT a Legitimate Reason Why

question 33

Multiple Choice

Which of the following is NOT a legitimate reason why it is generally considered easier to estimate the cost of preferred stock than it is to estimate the cost of common stock?

• A) Preferred stock generally carries with it a fixed dividend payment.
• B) Preferred stock is often rated for default risk.
• C) The cost of preferred stock can be calculated as a perpetuity based on the fixed dividend payment and the present stock price.
• D) Calculation of the cost of preferred stock does not require any information about future preferred dividends.
• E) The cost of preferred stock is simply equal to its dividend yield.

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Definitions:

Codex Colbertinus

A historical manuscript containing parts of the Latin Vulgate Bible, dating from the 12th century.

Experimentally

In a manner involving trials or tests to discover something unknown or test a principle, typically in a controlled environment.

Northern Europe

A geographical and cultural region in the northern part of Europe, which includes countries such as Denmark, Finland, Iceland, Norway, and Sweden.

Italy

A country in Southern Europe, known for its rich history, art, architecture, and significant contribution to the cultural and historical development of Europe.