You are analyzing a new security that has been promoted as equity, with the following features:

Question:

You are analyzing a new security that has been promoted as equity, with the following features:
• The on the security is fixed in dollar terms for the life of the security, which is 20 years.
• The is not tax-deductible.
• In the case of default, the holders of this security will receive cash only after all debt holders, secured, and unsecured, are paid.
• The holders of this security will have no voting rights.
On the basis of the description of debt and equity in the chapter, how would you classify this security? If you were asked to calculate the debt ratio for this firm, how would you categorize this security?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...