is my response accurate Preferred stock often offers a lower pre-tax yield than debt becauseOpreferred dividends are tax-deductibleinterest on debt is tax-deductibleO interest on debt is not tax-deductibleO preferred dividends are not tax-deductibleOmost preferred shareholders are corporations, for whom 50% of preferred dividend income is exemptfrom corporate income tax

. Preferred dividends are tax-deductible - This statement is incorrect. Preferred dividends are not…

Answered: Preferred stock often offers a lower…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter13: Comparative Forms Of Doing Business

Section: Chapter Questions

Problem 22DQ

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The after-tax cost of debt is ________. A) lower than the cost of common stock but higher than the cost of preferred stock. B) lower than the cost of preferred stock but higher than the cost of common stock. C) lower than both the cost of preferred stock and the cost of common stock. D) None of the above.
Which of the following is true regarding preferred stock, common stock & debt? Preferred stock pays a dividend that is a tax deductible expense to the company. Common stock dividends are not tax deductible. Preferred stockholders have voting rights. Preferred shareholders have a higher claim on the firm's earnings than do bondholders. Preferred dividends are a contractual obligation of the firm. Common shareholders have voting rights. Dividends on common stock are perpetual. If a firm stops paying common dividends, it must repay shareholders those dividends it missed. Interest on debt is at at the discretion of management and can be stopped or suspended if the firm has financial difficulty. Preferred and common stock are perpetual - meaning that they have infinite maturities. Preferred & common dividends are not contractual obligations of the firm and are not tax deductible expenses. Preferred dividends, while not contractual, are much more stable than common dividends and are often…
Which of the following statements best describes the purpose of the dividend refund? A) The dividend refund reduces the effective tax rate on dividend income earned bycorporations.B) The dividend refund allows corporations with a balance in their capital dividend account toreduce their tax payable by paying dividends.C) The dividend refund reduces the effective tax rate on dividend income earned byshareholders.D) The dividend refund allows corporations with a balance in their RDTOH accounts to reducetheir tax payable by paying dividends.
Which of the following statements with respect to dividends is NOT correct? O A. Stock dividends are subject to the same gross up and tax credit procedures as cash dividends. OB. All taxable dividends paid by Canadian controlled private corporations are non-eligible dividends OC. Capital dividends can be received by individuals without tax consequences O D. Dividend tax credits are based on a percentage of the gross up on dividends received.
A corporate distribution is includible in a shareholder’s gross income to the extent that it is a “dividend.” Please set forth the definition of a dividend and discuss the distribution rules as set forth in Code Section 301 with an example. Contrast the Section 301 distribution rules with the redemption rules under Section 302 and provide an example of a redemption under the 50%/80% test of Section 302(b)(2) setting forth the tax consequences to the shareholder of meeting this test and, in the alternative, failing this test.
a. Should preference shares be disclosed as ‘equity’ or as ‘debt’? b. ) ‘Income tax shall be paid on taxable income times tax rate. It makes sense to pay income tax for current year, but we should not be asked to account for deferred tax assets and liabilities’. Do you agree with this statement? Discuss your arguments.
Qualified dividends are taxed for individual stockholders Seleccione una: a. at the corporate tax rate b. at the super secret dividend tax rate. C. at the capital gains tax rate d. as normal income
A firm’s preferred stock often sells at yields below its bonds because:a. Preferred stock generally carries a higher agency rating.b. Owners of preferred stock have a prior claim on the firm’s earnings.c. Owners of preferred stock have a prior claim on a firm’s assets in the event of liquidation.d. Corporations owning stock may exclude from income taxes most of the dividend income they receive.
8. Which statement is true? Group of answer choices a. Preferred stock is similar to corporate bonds because the corporation usually pays the holders of the securities a fixed amount. b. Preferred stockholders have priority over bondholders when it comes to the payment of c. Preferred stock is similar to corporate bonds because dividends on preferred stock, like interest on bonds, are a tax-deductible expense to the corporation. d. Preferred stockholders are considered to be the true owners of corporations.
Which of the following statements is true regarding the payment of dividends to preferred shareholders? O a. Payments to debtholders are paid before dividends are paid to preferred shareholders. O b. Dividends to preferred shareholders are a tax-deductible expense to the issuing company. O c. Dividends to preferred shareholders are paid before payments are made to debtholders. O d. Dividends to preferred shareholders are paid after dividends are paid to common shareholders.
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
Stock dividends and stock splits are similar in that both do not change total stockholders’ equity. (True/False) A company must accrue a liability for sick pay that accumulates but does not vest. (True/False) A company may exclude a short-term obligation from current liabilities if the firm can demonstrate an ability to complete a refinancing. (True/False) Federal income taxes should be included in an employer’s payroll tax expense. (True/False) Whether an employee earns $80,000 a year or $800,000 a year, all of the earnings will be subject to Medicare deductions. (True/False) To record compensated absences as a liability GAAP establishes four criteria. The employer needs to meet any two of these four criteria in order to recognize a liability for compensated absences. (True/False) Stock dividends and stock splits both cause the number of shares outstanding to increase and retained earnings to decrease. (True/False)

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