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

question 43

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 the options are correct.

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Definitions:

Defence Mechanism

Psychological strategies brought into play by the unconscious mind to protect an individual from anxiety or social sanctions.

Displacement

In psychology, a defense mechanism where negative feelings or desires are transferred from the original source to a more acceptable or less threatening target.

File Folders

Office supplies used to hold papers together, typically made of thick paper or plastic, designed for organizing documents.

Defence Mechanism

Psychological strategies used unconsciously by individuals to protect themselves from anxiety or guilt by denying or distorting reality.