A Firm Is Paying an Annual Dividend of $2

question 37

Multiple Choice

A firm is paying an annual dividend of $2.65 for its preferred stock which is selling for $57.00. There is a selling cost of $3.30. What is the after-tax cost of preferred stock if the firm's tax rate is 33%?

• A) 2.02%
• B) 4.93%
• C) 5.79%
• D) 6.11%

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Definitions:

Cause and Effect

A relationship where one event (the cause) makes another event happen (the effect).

Random Selection

A method of sampling in which participants are chosen from a larger population entirely by chance, ensuring that every individual has an equal probability of being selected.

Random Assignment

Assignment of participants in an experiment to groups in such a way that each person has an equal chance of being placed in any group.

Convenience Sampling

A sampling method where participants are selected based on their availability and willingness to take part, rather than using random selection.