Fern Has Preferred Stock Selling for 95 Percent of Par

question 79

Multiple Choice

Fern has preferred stock selling for 95 percent of par that pays an 8 percent annual coupon. What would be Fern's component cost of preferred stock?

• A) 7.60 percent
• B) 8.00 percent
• C) 8.42 percent
• D) 9.00 percent

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Definitions:

Adjust

To make modifications to records, accounts, or systems to correct discrepancies or align them with actual conditions.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded on an asset since its purchase.

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life, representing wear and tear, decay, or obsolescence.

Contra Asset

An account on a company's balance sheet that reduces the value of a related asset, such as accumulated depreciation.