Since 70% of the Preferred Dividends Received by a Corporation

question 22

True/False

Since 70% of the preferred dividends received by a corporation are excluded from taxable income,the component cost of equity for a company that pays half of its earnings out as common dividends and half as preferred dividends should,theoretically,be
Cost of equity = r_s(0.30)(0.50)+ r_ps(1 − T)(0.70)(0.50).

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