The Cost of Perpetual Preferred Stock Is Found as the Preferred's

question 44

True/False

The cost of perpetual preferred stock is found as the preferred's annual dividend divided by the market price of the preferred stock.No adjustment is needed for taxes because preferred dividends, unlike interest on debt, is not deductible by the issuing firm.

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Definitions:

Financing Activities

Transactions and events that involve changes in the size and composition of the equity and borrowings of a company.

Cash Inflow

The total amount of money being transferred into a business, typically from operations, investments, or financing.

Bonds Payable

Long-term liabilities represented by bonds that a company is obligated to repay at a future date.

Investing Activity

Financial actions related to the purchase and sale of long-term assets and other investments, not including inventory, categorized in the cash flow statement.