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

• The dividend on the security is fixed in dollar terms for the life of the security, which is 20 years.

• The dividend is not tax deductible.

• In the case of default, the holders of this security will receive cash only after all debt holders, secured as well as unsecured, are paid.

• The holders of this security will have no voting rights. Based upon 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?