Quiz Ch 10 – T/F Component Cost of Equity with Preferred Dividends
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: Given the exclusion of 70% of preferred dividends from taxable income, the theoretical cost of equity for a company dividing earnings equally between common and preferred dividends is: Cost of equity = rs(0.15) + rps(0.35)(1 – T).