Which of the following is not true about preferred stock?
A) 70% of dividends are nontaxable to other corporations which hold preferred stock.
B) The after-tax cost is higher than debt with the same yield.
C) Dividends are legal obligations of the firm.
D) Preferred stocks are often cumulative in respect to dividends.

Question

Quizplus · Accepted Answer

Dividends on preferred stock are not legal obligations of the firm; they are paid at the discretion of the company's board of directors.

Which of the Following Is Not True About Preferred Stock