Which of the following are the advantages of issuing preferred stock over debt? More than one answer may be correct. Multiple select question. Preferred dividends are non-taxable, whereas interest income is taxable. Preferred shareholders cannot force a corporation into bankruptcy because of unpaid dividends. Firms issuing preferred stock can avoid the threat of bankruptcy. Unpaid preferred dividends are not debts of a corporation. Preferred dividend increases the earnings per share (EPS) of a firm, whereas interest on debt decreases the EPS of a firm.

Which of the following are the advantages of issuing preferred stock over debt? More than one answer may be correct. Multiple select question. Preferred dividends are non-taxable, whereas interest income is taxable. Preferred shareholders cannot force a corporation into bankruptcy because of unpaid dividends. Firms issuing preferred stock can avoid the threat of bankruptcy. Unpaid preferred dividends are not debts of a corporation. Preferred dividend increases the earnings per share (EPS) of a firm, whereas interest on debt decreases the EPS of a firm.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter15: Dividend Policy

Section: Chapter Questions

Problem 6P

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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
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
Which of the following reasons for issuing preferred stock is false? Multiple choice question. Preferred stock may be a means of raising equity without surrendering control. Firms issuing preferred stock can avoid the threat of bankruptcy. Unpaid preferred dividends are not debts of a corporation. Preferred shareholders can force a corporation into bankruptcy because of unpaid dividends.
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.
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
* 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 of the following statements is CORRECT? O The debt ratio that maximizes expected EPS generally exceeds the debt ratio that maximizes share price. O Increasing its use of financial leverage is one way to increase a firm's return on investors' capital (ROIC). O If a company were to issue debt and use the money to repurchase common stock, this would reduce its return on investors' capital (ROIC). O If a change in the bankruptcy code made bankruptcy less costly to corporations, this would tend to reduce corporations' debt ratios.
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hich of the following statements is CORRECT? a. Preferred stockholders have a priority over bondholders in the event of bankruptcy to the income, but not to the proceeds in a liquidation. b. The preferred stock of a given firm is generally less risky to investors than the same firm's common stock. c. Corporations cannot buy the preferred stocks of other corporations. d. Preferred dividends are not generally cumulative. e. A big advantage of preferred stock is that dividends on preferred stocks are tax deductible by the issuing corporation. Provide an explanation for the choice
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