A ﬁrm has common and preferred stock outstanding, both of which just paid a dividend of $3 per
share. Which do you think will have a higher share price and why? If the ﬁrm also has an issue of
non-callable debentures outstanding, which do you think investors will require a higher return on,
the debentures or the shares of common stock? Explain.

Question

Quizplus · Accepted Answer

The Answer of A ﬁrm has common and preferred stock outstanding, both of which just paid a dividend of $3 per
share. Which do you think will have a higher share price and why? If the ﬁrm also has an issue of
non-callable debentures outstanding, which do you think investors will require a higher return on,
the debentures or the shares of common stock? Explain.

A ﬁRm Has Common and Preferred Stock Outstanding, Both of Which