Which of the Following Statements Is CORRECT

question 32

Multiple Choice

Which of the following statements is CORRECT?

• A) 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.
• B) 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.
• C) 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.
• D) One of the advantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.
• E) A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.

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Definitions:

Containers Refurbished

Used or old containers that have been restored or repaired to a usable condition.

Flexible Budget

A fiscal planning tool that varies with the levels of output or sales, designed to allocate resources more effectively.

Refurbishing Materials

Materials used in the process of renovating and restoring products or facilities to a like-new condition.

Planning Budget

A budget prepared for a specific level of activity, often used in flexible budgeting to adjust for various activity levels.