A Firm Has $2 Million Market Value and It Sells

question 44

Multiple Choice

A firm has $2 million market value and it sells preferred stock with a par value of $100. If the coupon rate on the preferred stock is 6% and the preferred stock trades at $98, what is the cost of preferred stock capital?

• A) 5.82%
• B) 6.12%
• C) 6.43%
• D) 6.73%

---

Definitions:

Taxable Income

The amount of an individual's or corporation's income that is used to determine how much tax is owed to the federal government.

Foreign Income Taxes

Taxes paid to a foreign government for income earned in the foreign country.

Child Tax Credit

A credit aimed at helping families offset some of the costs of raising children by reducing their tax liability.

AGI

Adjusted Gross Income, calculated as gross income minus specific adjustments, used to determine tax liability and eligibility for certain tax benefits.