A corporation that is not taxable issues preferred stock to lower their financing costs because Blank______. Multiple choice question. a new issue of preferred stock decreases the total equity of the firm a new issue of preferred stock does not affect the debt-to-equity ratio of the firm preferred dividends are significantly lower than interest payments preferred dividends are non-taxable, whereas interests are taxable

A corporation that is not taxable issues preferred stock to lower their financing costs because Blank______. Multiple choice question. a new issue of preferred stock decreases the total equity of the firm a new issue of preferred stock does not affect the debt-to-equity ratio of the firm preferred dividends are significantly lower than interest payments preferred dividends are non-taxable, whereas interests are taxable

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter15: Shareholders’ Equity: Capital Contributions And Distributions

Section: Chapter Questions

Problem 10Q

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A corporation that is not taxable issues preferred stock to lower their financing costs because Blank______. Multiple choice question. preferred dividends are non-taxable, whereas interests are taxable preferred dividends are significantly lower than interest payments a new issue of preferred stock does not affect the debt-to-equity ratio of the firm a new issue of preferred stock decreases the total equity of the firm
* Your answer is incorrect. A company may repurchase its own shares for all of the following reasons, except O to reduce the number of shares issued and thereby increase earnings per share and return on equity. to have additional shares available for use in the acquisition of other companies. O to attempt to influence the market price of the shares. O to reduce the number of shares issued in order to meet debt to equity bank covenant requirements.
Which is not true of preference shares? * A. Payment of dividends is mandatory if cumulative. B. Preference shares are convertible to ordinary shares or bonds. C. It is similar to debt financing in terms of limited cost payment. D. Cost is higher than cost of bonds.
From the issuing firm's point of view, one advantage of preferred stock over bonds is A) preferred dividends are a deductible expense for tax purposes. B) preferred voting privileges concentrate power in the hands of managers and major shareholders. C) a dividend payment can be skipped without triggering bankruptcy. D) all of the above
Identify the reasons due to which preferred stock is often considered debt in disguise. More than one answer may be correct. Multiple select question. Preferred stocks are not transferable. Preferred shareholders do not receive any returns over and above the stated return. Preferred stocks carry credit ratings. Preferred stocks are not callable.
Which of the following statements is CORRECT? a. The preferred stock of a given firm is generally less risky to investors than the same firm's common stock. b. Corporations cannot buy the preferred stocks of other corporations. c. Preferred dividends are not generally cumulative. d. A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation. e. Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation.
Which of the following statements correctly describe characteristics of preference shares? Group of answer choices A. The required return on preference equity is expected to be less than the required return from ordinary equity. B. None of the other statements are correct C. A participating preference share participates in the interest payments paid to debtholders. D. Preference shares are called “hybrid” securities because they display characteristics of both short-term and long-term debt.
Preferred stock is a hybrid security, because it has some characteristics typical of debt and others typical of equity. The following table lists various characteristics of preferred stock. Determine which of these characteristics is consistent with debt and which is consistent with equity. Characteristics Debt Equity Usually has no voting rights. No tax adjustments are made when calculating the cost of preferred stock. Consider the case of Tamin Enterprises: At the present time, Tamin Enterprises does not have any preferred stock outstanding but is looking to include preferred stock in its capital structure in the future. Tamin has found some institutional investors that are willing to purchase its preferred stock issue provided that it pays a perpetual dividend of $12 per share. If the investors pay $98.90 per share for their investment, then Tamin’s cost of preferred stock (rounded to four decimal places) will be .
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A rights-issue occurs when ________ ? Emergency funding is sought from institutional investors only. New bonds are issued via an underwriter. Opportunity to purchase new shares is offered pro-rata to existing shareholders. A dividend is issued to preference shareholders.
Share repurchases are often more tax-efficient than declaring dividends because Question 8 options: a) companies can reduce their taxable income by reducing the number of shares outstanding b) only shareholders who sell their stock are taxed on any resulting capital gain c) the ordinary income tax rate on buybacks is often lower than the long-term capital gains tax rate on dividends d) B and C are correct e) None of the options are correct
A major difference between common and preferred stock Seleccione una: a. is that common stockholder have voting rights and preferred stockholders do not. b. is In the case of liquidation after a bankruptcy, common stockholder will be paid before preferred stockholders. c. is that preferred stockholder have voting rights and common stockholders do not. O d. is that common stock have a fixed dividend and preferred stock does not pay a dividend.