XYZ Inc. has determined that it needs to raise additional capital to fund current asset acquisitions. XYZ Inc. is proposing to issue and sell a security known as Trust Preferred Stock. The Trust Preferred Stock comes with a 7% interest rate. While the security has an unlimited life, XYZ Inc. maintains the right to mandatorily redeem (or call) the Trust Preferred Stock from shareholders after 10 years. The Trust Preferred Stock has a non-cumulative feature permitting XYZ Inc. from having to make-up missing distributions from prior years before distributing dividends to common shareholders in the current year. However, if XYZ Inc. fails to make distributions to the holders of the Trust Preferred Stock for two consecutive years, then the holders of the Trust Preferred Stock have participation rights in XYZ Inc. and are allowed to appoint two members to XYZ Inc.'s Board of Directors. Based on this information determine whether this proposed security is more like debt or more like equity with respect to: The 7% Interest Rate Yield for the Trust Preferred Stock [ Select ] The Unlimited Life of the Trust Preferred Stock [ Select] The right to mandatory redeem (or Call) the Trust Preferred Stock after 10 year [ Select ] Non-Cumulative feature allowing XYZ Inc. not to make-up prior year omitted distributions before dividend payments to common shareholders [ Select] Trust Preferred Stock holders right to appoint two members to the Board of Directors (participate in management) in the event XYZ Inc. fails to make payments to the Trust Preferred Stock holders for two years in a row. [ Select ] XYZ Inc. has determined that it needs to raise additional capital to fund current asset acquisitions. XYZ Inc. is proposing to issue and sell a security known as Trust Preferred Stock. The Trust Preferred Stock comes with a 7% interest rate. While the security has an unlimited life, XYZ Inc. maintains the right to mandatorily redeem (or call) the Trust Preferred Stock from shareholders after 10 years. The Trust Preferred Stock has a non-cumulative feature permitting XYZ Inc. from having to make-up missing distributions from prior years before distributing dividends to common shareholders in the current year. However, if XYZ Inc. fails to make distributions to the holders of the Trust Preferred Stock for two consecutive years, then the holders of the Trust Preferred Stock have participation rights in XYZ Inc. and are allowed to appoint two members to XYZ Inc.'s Board of Directors. Based on this information determine whether this proposed security is more like debt or more like equity with respect to: The 7% Interest Rate Yield for the Trust Preferred Stock [ Select ] The Unlimited Life of the Trust Preferred Stock [ Select] The right to mandatory redeem (or Call) the Trust Preferred Stock after 10 year [ Select ] Non-Cumulative feature allowing XYZ Inc. not to make-up prior year omitted distributions before dividend payments to common shareholders [ Select] Trust Preferred Stock holders right to appoint two members to the Board of Directors (participate in management) in the event XYZ Inc. fails to make payments to the Trust Preferred Stock holders for two years in a row. [ Select ]
