Which is a characteristic of the cost of preferred stock?
A) since preferred stock dividends are fixed, they are tax deductible
B) because preferred stock has no maturity, the cost analysis is similar to that of debt
C) preferred stock is valued as a perpetuity
D) none of the other answers are correct

Question

Quizplus · Accepted Answer

Preferred stock is typically valued as a perpetuity because the dividends are fixed and paid indefinitely, making it very similar to a bond with no maturity. Option A is incorrect because preferred stock dividends are not tax deductible for the issuing corporation, and option B is not entirely accurate because while the cost analysis may have some similarities to debt, it is still considered equity. Option D is incorrect because there is a correct answer.

Which Is a Characteristic of the Cost of Preferred Stock