Preferred dividends are paid from _______ earnings.

All else being equal, is a firm more or less likely to issue preferred stock if its tax rate increases?

-Less likely

-Doesnt matter

-More likely

Consider the case of THC Endowment:

THC Endowment is an institutional investor and owns preferred stocks worth a 20% stake in Mitata Co. Mitata Co. paid out dividends of $235,200 to THC Endowment this year. Mitata Co. had issued perpetual preferred stock with a par value of $100 and pays a(n) 11.20% annual dividend. Investors required return on Mitata Co.s preferred stock is 15.01%, and the tax rate for both the companies is 25%. Based on the information given, calculate the following:

The current market price of Mitata Co.s preferred stock is: ________

THC Endowment tax liability on its dividend income will be: _______

Consider that Mitata Co. also issued market auction preferred stock. Which of the following is true about market auction preferred stock?

-Yield set on the issue after an auction on the preferred stock is the lowest yield sufficient to sell all shares being offered at that auction.

-Yield set on the issue after an auction on the preferred stock is the highest yield sufficient to sell all shares being offered at that auction.