What Is the After-Tax Cost of Preferred Stock That Sells

question 32

Multiple Choice

What is the after-tax cost of preferred stock that sells for $10 per share and offers a $1.20 dividend when the tax rate is 35%?

• A) 4.20%
• B) 7.80%
• C) 8.33%
• D)12.00%

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Definitions:

Negative Externalities

These are unintended and adverse effects of a product or economic activity that impact third parties who are not directly involved in the activity.

National Parks

Areas of natural beauty, historical significance or ecological importance, protected by the government for public enjoyment and preservation.

Public Good

An item or service offered to every member of a community for free, supplied either by public authorities or by a private entity or group without seeking financial gain.

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A resource like air or water that is not owned by anyone, cannot be traded in a market, and is available for everyone to use, often leading to overuse and depletion.