Quiz Ch 10 – T/F Component Cost of Equity with Preferred Dividends

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition

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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).

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