A Preferred Stock Has a Par Value of $100 and Is

question 22

Multiple Choice

A preferred stock has a par value of $100 and is convertible into 4 shares of common stock. The preferred stock is valued at $87 a share and the common stock is selling at $20 a share. What is the conversion value?

• A) $25
• B) $80
• C) $95
• D) $100
• E) $120

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Definitions:

Disposal Value

The estimated monetary value of an asset at the end of its useful life.

Annual Cash Revenues

The total money received from sales activities, without accounting for any deductions or costs, over the course of a year.

Hurdle Rate

The minimum rate of return on an investment that is required by a manager or investor to proceed with the investment.

Income Taxes

Taxes imposed by the government on the income generated by businesses and individuals.