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

question 72

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 are correct.

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Definitions:

Similar in Age

Having a close or identical age to others, often implying shared experiences or generational characteristics.

Distributed Leadership

A leadership approach in which multiple members of an organization share responsibility and power in decision-making processes.

Responsibility

The state or fact of being accountable or to blame for something, often involving an obligation to act.

Cohesiveness

The degree to which members are attracted to a group and motivated to remain a part of it.