You are a common shareholder in FB Datatech Inc., a company that has experienced rapid growth since it was incorporated five years ago. You bought your shares as part of the company’s IPO. You have read a number of interviews with the company’s founder and believe that the company is poised for exponential growth in the next few years. A recent news release from the company stated that the board of directors had adopted a number of objectives related to the financial management of the company, including one related to dividends. It states that the company aims to distribute dividends equivalent to 25% of the company’s net income from the preceding year. Finally, you have just heard that the company has recently issued a series of preferred shares that pay a fixed rate dividend of 4% annually, with the proceeds being used to purchase additional IT equipment to expand the company’s operations across North America.

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How do you think your investment will be affected by the issuance of the preferred shares? Explain why the company’s board of directors may have opted to issue preferred shares to finance the acquisition of the new IT equipment.