Preferred stock may exist because:
A)losses before income taxes prevent a company from enjoying the tax advantages of debt interest while there is no tax advantage for preferred dividends.
B)an advantage exists for the firm; preferred shareholders can not force the company into bankruptcy because of unpaid dividends.
C)corporations get a 70% tax exemption on preferred dividends received.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

A) Losses before income taxes prevent a company from enjoying the tax advantages of debt interest while there is no tax advantage for preferred dividends. 
B) An advantage exists for the firm; preferred shareholders cannot force the company into bankruptcy because of unpaid dividends. 
C) Corporations get a 70% tax exemption on preferred dividends received. Therefore, all of the above are reasons why preferred stock may exist.

Preferred Stock May Exist Because