Since 70 percent of preferred dividends received by a corporation is excluded from taxable income, the component cost of equity for a company which pays half of its earnings out as common dividends and half as preferred dividends should, theoretically, be

Cost of equity = rs (0.30) (0.50) + rps (1 - T) (0.70) (0.50).

a. True

b. False

Question

Business

Jadyn Tyler

10 June, 18:25

Since 70 percent of preferred dividends received by a corporation is excluded from taxable income, the component cost of equity for a company which pays half of its earnings out as common dividends and half as preferred dividends should, theoretically, be

Cost of equity = rs (0.30) (0.50) + rps (1 - T) (0.70) (0.50).

a. True

b. False

+4

Answers (1)

Know the Answer?

Alexandra Barnes · Answer 1

The answer is False

Explanation:

Since the 70 percent of preferred dividends received by a company is excluded from taxable income, the component cost of equity for a corporation which pays half of its revenue out as a common dividends and half as preferred dividends should, technically be.