Preferred stock is a hybrid security, because it has some characteristics typical of debt and others...

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Preferred stock is a hybrid security, because it has some characteristics typical of debt and others typical of equity. The f

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Answer 1

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Answer #1

Has a par, or face value = Debt

Failure to pay a preferred dividend does not send the firm into bankruptcy = Equity

Cost of preferred stock = Annual dividend/Market price of preferred stock

Cost of preferred stock = $11/$97.95

Cost of preferred stock = 0.112302 = 11.2302%

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Answer 2

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