Disadvantage for the issuer of preferred stock

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1. Preferred stock offers the issuing corporation and investors advantages and disadvantages. Which of the following statements describes a disadvantage for the issuer of preferred stock?

a. The after-tax cost of preferred stock is higher than the after-tax cost of debt

b. Nonconvertible preferred stock helps prevent the dilution of common equity.

 

2. Firms that invest in companites' preferred stock may exclude 70% of their preferred dividend income from taxes. TRUE or FALSE?

Reference no: EM13878468

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