Attention: Due to a bug in Google Chrome, this page may not function correctly. Click here to learn more 3. Cost of preferred stock Aa Aa Preferred stock is a hybrid security, because it has some characteristics typical of debt and others typical of equity The following table lists various characteristics of preferred stock. Determine which of these characteristics is consistent with debt and which is consistent with equity. Characteristics Has a par, or face, value Failure to pay a preferred dividend does not send the firm into bankruptcy Debt Equity Consider the case of Galbraith Enterprises: At the present time, Galbraith Enterprises does not have any preferred stock outstanding but is looking to include preferred stock in its capital structure in the future. Galbraith has found some institutional investors that are willing to purchase its preferred stock issue provided that it pays a perpetual dividend of $11 per share. If the investors pay $95.70 per share for their investment, then Galbraith's cost of preferred stock (rounded to four decimal places) will be