Since 70% of the Preferred Dividends Received by a Corporation

question 58

True/False

Since 70% of the preferred dividends received by a corporation are excluded from taxable income, the component cost of equity for a company that pays half of its earnings out as common dividends and half as preferred dividends should, theoretically, beσσCost of equity = rs(0.30)(0.50) + rps(1 σ-T)(0.70)(0.50).

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Definitions:

Sperm

Male reproductive cells designed for fertilization of the female ovum, contributing half of the genetic information to the offspring.

Egg

A reproductive cell produced by female organisms, capable of developing into a new individual upon fertilization.

Endoderm

Innermost primary tissue layer of an animal embryo that gives rise to the linings of the digestive tract and associated structures.

Germ Layer

Primary tissue layer of a vertebrate embryo—namely, ectoderm, mesoderm, or endoderm.