The Reason That We Do Not Use an After-Tax Cost

question 88

Multiple Choice

The reason that we do not use an after-tax cost of preferred stock is:

• A)because preferred dividends are paid out of before-tax income.
• B)because most of the investors in preferred stock do not pay tax on the dividends.
• C)because we can only estimate the marginal tax rate of the preferred stockholders.
• D)None of these answers is correct.

Recognize the challenges in setting up and implementing tradable emissions permits and emissions taxes.

Understand external benefits in the context of environmental economics and the impact on market outcomes without regulation.

Understand the concept of externalities and how they impact social welfare.

Identify positive externalities and examples of activities that generate them.

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Definitions:

Stock Return

The gain or loss on a stock investment, usually expressed as a percentage of the investment's initial cost.

Market Return

The total return on investment in the stock market, considering both capital gains and dividends.

Regression Line

A statistical tool used in linear regression to model the relationship between two variables by fitting a line through the data points that best represents the dependence of one variable on the other.

Dependent Variable

A variable in statistical modeling or experimental design that is expected to change as a result of manipulations to the independent variable.