Companies that have preferred stockholders promise to pay a stated dividend for an infinite period. Preferred stock is treated like a perpetuity if the payments last forever. Preferred stocks are considered to be a hybrid of a stock and a bond. Companies can suspend the dividend paid to preferred stockholders without throwing the company into bankruptcy. As with bonds, preferred stockholders receive a fixed dividend before earnings are paid out to common stockholders and, as with common stock, preferred stockholders can benefit from potential appreciation in the value of stock. Central Roast Corp. pays an annual dividend rate of 8.60% on its preferred stock that currently returns 11.52% and has a par value of $100.00. What is the value of Central Roast Corp.'s stock? $111.98 $74.65 $100.00 $89.58 Suppose, due to high inflation, interest rates rise and pull the preferred stock's yield to 14.98% The value of the preferred stock will . Preferred stock is often called a hybrid security because it has some characteristics that are typical of debt and others that are typical of equity. The following table lists several characteristics of preferred stock. Determine which of these characteristics are consistent with debt securities and which are consistent with equity. Eades Logistics Corp. has the right to buy back its preferred stock from its preferred stockholders; however, the company will have to pay the preferred stockholders an amount greater than the par value of the preferred stock. Which type of provision does Eades Logistics Corp. have in its preferred stock agreement? A call provision A sinking fund provision A participating provision For the same issuing firm and on the same day of issuance, which security tends to have a lower after tax cost to the issuer, debt or preferred stock? Why is this the case? Preferred stock, because preferred stock issues are not allowed to have sinking fund provisions Preferred stock, because its has priority over debt in the payment of dividends and the distribution of liquidated assets Debt, because its interest payments ore not tax deductible Debt, because its interest payments are tax deductible