problem: Determine the correct statement?
[A] Preferred stock is normally expected to provide steadier, more reliable income to investors than the same firm’s common stock, and, as a result, the expected after-tax yield on the preferred is lower than the after-tax expected return on the common stock.
[B] The preemptive right is a provision in all corporate charters that gives preferred stockholders the right to purchase [on a pro rata basis] new issues of preferred stock.
[C] One of the advantages to financing with preferred stock is that 70% of the dividends paid out are tax deductible to the issuer.
[D] A major disadvantage of financing with preferred stock is that preferred stockholders typically have supernormal voting rights.
[E] One of the disadvantages to a corporation of owning preferred stock is that 70 percent of the dividends received represent taxable income to the corporate recipient, whereas interest income earned on bonds would be tax free.