Preferred stock has a dividend rate of 12 percent the tax

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Cost of Financing. Mason Corporation is considering the issuance of either debt or preferred stock to finance the purchase of a facility costing $1.5 million. The interest rate on the debt is 16 percent. Preferred stock has a dividend rate of 12 percent. The tax rate is 46 percent.

(a) What is the annual interest payment?

(b) What is the annual dividend payment?

(c) What is the required income before interest and taxes to satisfy the dividend requirement?

Reference no: EM13574389

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