bond valuation

Maneesh 02 May 2020 at 13:27 PM

One reason that a financial manager may prefer to issue preferred stock rather than debt is because:

A) The cost of fixed debt is less expensive since it is tax-deductible even if a sinking fund is required to retire the debt

B) In a legal sense, preferred stock is equity; therefore, dividend payments are not legal obligations.

C) The preferred dividend is often cumulative, whereas interest payments are not

D) Payments to preferred stockholders are not considered fixed payments

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FACULTY 13 May 2020 at 02:00 PM

n a legal sense, preferred stock is equity; therefore, dividend payments are not legal obligations.(option B)

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