When the dividend rate on preferred stock is less than the rate of return earned on a corporation’s assets, it is called:
A. Financial leverage.
B. Discount on stock.
C. Premium on stock.
D. Preemptive right.
E. Capital gain.
When the dividend rate on preferred stock is less than the rate of return earned on a corporation’s assets, it is called Financial leverage. |
Financial leverage increases rate of return earned by common stockholders when the dividend rate on preferred stock is less than the rate of return on assets. |
Option A Financial leverage is correct |
When the dividend rate on preferred stock is less than the rate of return earned on...
Problem 8-1(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 16 percent on a $75 par value? The appropriate discount rate for a stock of this risk level is 14 percent. The value of the preferred stock is _______ . (Round to the nearest cent.)(Preferred stock valuation) The preferred stock of Gandt Corporation pays a $0.50 dividend. What is the value of the stock if your required return is 11 percent? The value of the...
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 14 percent on a $ 125 par value? The appropriate discount rate for a stock of this risk level is 9 percent.
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 13 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 14 percent. The value of the preferred stock is $ . (Round to the nearest cent.)
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 13 percent on a $100 par value? The appropriate discount rate for a stock of this risk level is 10 percent. The value of the preferred stock is $ (Round to the nearest cent)
(Preferred stock valuation) What is the value of a preferred stock when the dividend rate is 16 percent on a $125 par value? The appropriate discount rate for a stock of this risk level is 13 percent. The value of the preferred stock is $ _______ . (Round to the nearest cent.) (Preferred stock valuation) The preferred stock of Gandt Corporation pays a $3.75 dividend. What is the value of the stock if your required return is 14 percent? The value of the...
If an asset is sold for less than its depreciation book value, it is taxed at the capital gain tax rate taxed at ordinary income tax rate. subject to tax savings due to capital loss not subject to any income tax consideration. Changes in the firm's cash flows that are a direct consequence of accepting a project are erosion cash flows e. Net present value cash flows incremental cash flows d. After tax cash flows 3. Under the IRR method,...
Click here to read the eBook: Preferred Stock PREFERRED STOCK RATE OF RETURN What will be the nominal rate of return on a perpetual preferred stock with a $100 par value, a stated dividend of 11% of par, and a current market price of (a) $61.00, (b) $85.00, (c) $117.00, and (d) $142.00? Round your answers to two decimal places. c. % d.
Dick's Co Pays an annual dividend of $6 to its preferred stock. The rate of return on T-Bill is 3% and the market risk premium is 8%. What is the intrinsic value of the preferred stock if the beta of the preferred stock is 1.257 Mountain Development Corporation is expected to pay a dividend of $3.00 in the upcoming year. Predicted to grow at the rate of 8% per year. The firms market capitalization rate is 14%. Using the constant...
Preferred Products has issued preferred stock with an annual dividend of $6.93 that will be paid in perpetuity. a. If the discount rate is 11%, at what price should the preferred sell? (Round your answer to 2 decimal places.) Current price b. At what price should the stock sell 1 year from now? (Round your answer to 2 decimal places.) Future price ſ c. What are the (i) the dividend yield; (ii) the capital gains yield; (iii) the expected rate...
Preferred Products has issued preferred stock with an annual dividend of $7.30 that will be paid in perpetuity. a. If the discount rate is 10%, at what price should the preferred sell? (Round your answer to 2 decimal places.) Current price $ 73.00 b. At what price should the stock sell 1 year from now? (Round your answer to 2 decimal places.) Future price c. What are the (i) the dividend yield; (ii) the capital gains yield; (iii) the expected...