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Answer on Economics of Enterprise Question for Lamarcus Streeter

Question #6133
3. Which of the following statements is CORRECT?

a. A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.
b. Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm’s common stock, and, as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common stock.
c. The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase (on a pro rata basis) new issues of preferred stock.
d. One of the disadvantages to a corporation of owning preferred stock is that 70% of the dividends received represent taxable income to the corporate recipient, whereas interest income earned on bonds would be tax free.
Expert's answer
Correct answer is c :
The preemptive right is a provision in all corporate
charters that gives preferred stockholders the right to purchase (on a pro rata
basis) new issues of preferred stock.
It's one of the advantages and
features of preferred stocks turnover

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Comments

Assignment Expert
10.04.2014 08:30

Assignment Expert
10.04.2014 08:29

Kimberley Owen
27.07.2013 14:06

The answer is incorrect.

Christopher Hindman
26.07.2013 10:44

This answer is wrong. The preemptive right does not apply to preferred stockholders, only common stock holders.

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