Explain why the return on equity of a company that has no preferred stock will be smaller

Question:

Explain why the return on equity of a company that has no preferred stock will be smaller than the return on equity of an otherwise similar firm that has preferred stock.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Financial Accounting An Introduction to Concepts, Methods and Uses

ISBN: 978-1133591023

14th edition

Authors: Roman L. Weil, Katherine Schipper, Jennifer Francis

See More Books

Question Posted: Mar 04, 2014 05:42 AM

See More Questions

Compton Corporation currently has no debt in its capital structure. As an unlevered firm, its cost of equity is 10 percent. It is considering substituting $40,000 in debt at 4 percent interest. The...
Explain how financial leverage impacts the return on equity ratio.
Explain why the return on shareholders equity provides information on the rate of return to common shareholders only.
What relationship would you expect to find between the level of development of a countrys financial system and its level of economic development? Explain in terms of the countrys level of savings and...
It is estimated that the net amount of carbon dioxide fixed by photosynthesis on the landmass of Earth is 5.5 1016 g/yr of CO2. Assume that all this carbon is converted into glucose. (a) Calculate...
What percent of head circumferences were greater than 48.25 cm? Assume that anthropologists have determined that the akidolestes, a small primitive mammal believed to have lived with the dinosaurs,...
Charity The table shows the results of a survey that asked 2850 people whether they were involved in any type of charity work. A person is selected at random from the sample. Find the probability of...
In the thermos shown in Figure, the innermost compartment is separated from the middle container by a vacuum. There is a final shell around the thermos. This final shell is separated from the middle...
If a business has a line of credit worth $1,000,000 with a bank and the terms state the used portion has a 4% rate and the unused portion has a .6% rate, how much total interest would the business...
Alvie Singer lives at 0 in the accompanying diagram and has four friends who live at A, B, C, and D. One day Alvie decides to go visiting, so he tosses a fair coin twice to decide which of the four...
In calculating return on assets, the simple ROA formula does not adjust for interest expense. Explain why is it technically more correct to make an adjustment for interest expense in calculating this...
An entrepreneur claimed that her new company had generated both superior profit margin performance and superior asset turnover performance. Explain whether such an outcome is likely to happen.
What do n, p, pn, and P-value represent?
# III: Worksheet 3 1. A 20 kg mass is allowed to accelerate down a frictionless 15 ramp. 20 kg 15 a. Draw a force diagram for the block. b. Determine the value of the x-component of the force of...
3.Baker Corporation has provided the following production and average cost data for two levels of monthly production volume. The company produces a single product Production Volume: 1,000 units:...
Suppose that you own the only company in the market to produce a certain product, and therefore you can determine the market price P dollars for each unit. Due to government regulations, the price of...
describes how the blast pressure front can bounce off solid, immovable obstacles and be redirected in another direction in a linear angle to the angle of the obstacle hat was struck
As the accounting clerk, you are tasked by the CFO to determine the cost of goods sold of Del Mundo Company for the year ended December 31, 2020. During Operating cost data annd inventory account...
Graphic solution for a linear programming problem Refer to the data about the production of sealers for Sharped Company in Exercise 25-10. Exercise 25-10 Setting up a linear programming problem...
In Exercises evaluate the limit, using LHpitals Rule if necessary. lim 07x cos x X
The strategy originally planned by top management is called __________. A. grand strategy B. realized strategy C. emergent strategy D. none of the above
Computations involving different cost-flow assumptions. Sun Health Foods purchases of vitamins during 2008, its first year of operations, were as follows: The inventory on December 231, 2008, was 420...
Computation involving different cost flow assumptions. Arnold Companys raw material Purchases during January, its first month of operations, were as follows: The inventory at January 31 was 3,500...
Effect of LIFO on financial statements over several periods. Harmon Corporation commenced operations on January 1, 2008. It uses a LIFO cost-flow assumption. Its purchases and sales for the first...
4. The risk-free rate of return is 3.78% and the market risk premium is 6.42%. What is the expected rate of return on a stock with a beta of 1.09?
Maddox Resources has credit sales of $ 1 8 0 , 0 0 0 yearly with credit terms of net 3 0 days, which is also the average collection period. Maddox does not offer a discount for early payment, so its...
Selk Steel Co., which began operations on January 4, 2017, had the following subsequent transactions and events in its long-term investments. 2017 Jan. 5 Selk purchased 50,000 shares (25% of total)...

Explain why the return on equity of a company that has no preferred stock will be smaller

Question:

Step by Step Answer:

For two otherwise identical firms the firm with preferred stock in its capital structure will have ...View the full answer

Financial Accounting An Introduction to Concepts, Methods and Uses

Related Video

Students also viewed these Accounting questions