Which of the Following Is Not True About Preferred Stock

question 99

Multiple Choice

Which of the following is not true about preferred stock?

• A) 100% of dividends are nontaxable to other corporations which hold preferred stock.
• B) The aftertax cost is higher than debt with the same yield.
• C) Dividends are legal obligations of the firm.
• D) Preferred stocks are often cumulative in respect to dividends.

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Definitions:

Standard Deviation

An indicator that quantifies the spread or diversity among data set values, showing the degree to which these values deviate from the average.

Mean

The arithmetic average of a set of numbers, calculated by adding up all the values and dividing by the number of values.

Pounds

A unit of weight commonly used in the United States and the United Kingdom, equivalent to 0.453592 kilograms.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values are around the mean.