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

question 64

Multiple Choice

What is the after-tax cost of preferred stock that pays a 12% dividend and sells at par if the firm's tax rate is 35%?

• A) 7.8%
• B) 8.5%
• C) 12.0%
• D) 16.2%

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Definitions:

Linear Graphing

A method of representing data or functions as a straight line on a graph, which showcases a linear relationship between variables.

Exponential Growth

Increase at a rate proportional to the current value, resulting in the growth accelerating over time.

Linear Equations

Definition: Algebraic equations in which each term is either a constant or the product of a constant and a single variable.

Linear Graphing

A method for representing data or equations that result in a straight line when plotted on a graph.