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2. Tax issues involving preferred stock The majority of nonconvertible preferred stock is bought and held by All else being equal, is a firm more
2. Tax issues involving preferred stock The majority of nonconvertible preferred stock is bought and held by All else being equal, is a firm more or less likely to purchase preferred stock as an investment if its tax rate investor:s increases? O Less likely O Doesn't matter O More likely Consider the case of THC Endowment: THC Endowment is an institutional investor and owns preferred stocks worth a 20% stake in Scorecard Corp Scorecard Corp. paid out dividends of $252,000 to THC Endowment this year. Scorecard Corp. had issued perpetual preferred stock with a par value of $100 and pays a(n) 12.00% annual dividend. Investors' required return on Scorecard Corp.'s preferred stock is 16.08%, and the tax rate for both the companies is 40%. Based on the information given, calculate the following: Value The current market price of Scorecard Corp.'s preferred stock is: THC Endowment tax liability on its dividend income will be
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