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:

Operating Segments

Components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the same enterprise.

Similar Economic Characteristics

A term used in financial analysis and consolidation to refer to entities or segments within enterprises that share similar economic environments, risks, and returns.

Combined

In financial terms, refers to the aggregation of financial data from several departments or business entities within a corporation to provide a complete financial profile.

Financial Statement Presentation

The method by which a company's financial data is arranged and reported to external parties, typically including balance sheets, income statements, and cash flow statements.