The cost of preferred stock: Select one: a. is equal to the dividend yield. b. i

Question

The cost of preferred stock:

Select one:

a. is equal to the dividend yield.

b. is equal to the yield to maturity.

c. is highly dependent on the dividend growth rate

d. is independent of the stock's price.

e. decreases when tax rates increase.

When computing the weighted average cost of capital, the weights used:

Select one:

a. are based on the book values of total debt and total equity.

b. are based on the market value of the firm's debt and equity securities.

c. are computed using the book value of the long-term debt and the book value of equity.

d. remain constant over time unless the firm issues new securities.

e. are restricted to the firm's debt and common stock.

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Q1 The cost of preferred stock a. is equal to the dividend yield.The cost of preferred stock is computed the same as the return on a perpetuity. Q2 When computing the weighted average cost of capital, the weights used b. are based on the market value of the firm's debt and equity securities.

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