chapter20long-termdebt,preferredstock,andcomm(編輯修改稿)
2025-02-27 20:28 本頁(yè)面
【文章內(nèi)容簡(jiǎn)介】 isions can be either immediate or deferred. ? The call provision provides financing flexibility for the firm as conditions change. Call Price The price at which a security with a call provision can be purchased by the issuer prior to the security’s maturity. 2021 Value of the Call Privilege ? The call privilege is valuable to the firm to the detriment of bondholders. As such, bondholders require a premium for this additional risk in the form of a higher yield. ? The greater the volatility of interest rates, the greater the probability that the firm will call the bonds. Thus, the calloption is more valuable all else equal. Callablebond value Noncallable bond value Calloption value = 2022 Preferred Stock A type of stock that promises a (usually) fixed dividend, but at the discretion of the board of directors. Preferred Stock and Its Features Basic Terms Par Value Dividend Rate Maturity 2023 Cumulative Dividends Feature ? For example, if the board of directors omits a $6 preferred dividend for two years, it must pay preferred shareholders $12 per share ($100 par value) before any dividend can be paid to mon shareholders. ? The corporation does not have to make up the dividend even if it is profitable, as long as the firm has no plans to pay dividends to mon shareholders. Cumulative Dividends Feature A requirement that all cumulative unpaid dividends on the preferred stock be paid before a dividend may be paid on the mon stock. 2024 Participating Feature ? Preferred stockholders have a prior claim on ine and an opportunity for additional return if the dividends to mon stockholders exceed a certain amount. ? A 6% participating preferred issue ($100 par) allows holders to share equally in any dividend in excess of $6. A $7 mon dividend results in an extra $1 dividend to the participating preferred shareholders. Participating Preferred Stock Preferred stock where the holder is allowed to participate in increasing dividends if the mon stockholders receive increasing dividends. 2025 Voting Rights in Special Situations ? Preferred stockholders are not normally given a voice in management unless the pany is unable to pay preferred stock dividends during a specified period. ? If such a situation presents itself, the class of preferred stockholders would be entitled to elect a specified number of directors. ? Any situation in which the pany defaults under restrictions in the agreement (similar to bond indenture) may lead to voting power for preferred shareholders. ? Preferred shareholders cannot force the immediate repayment of obligations (like debt obligations). 2026 Retirement of Preferred Stock ? Call Provision almost all issues carry a call provision because of the infinite maturity. It is often a cheaper method of retirement than open market purchases, inviting tenders, or an exchange of securities. ? Sinking Fund like bonds, many preferred issues provide for this method of retirement. ? Conversion certain issues are convertible into mon stock at the option of the preferred stockholder. Used most frequently in the acquisition of other panies (the transaction is not taxable to the shareholders of the acquired firm). 2027 Use of Preferred Stock in Financing ? The corporate issuer uses irregularly because the preferred dividend is not tax deductible. Utilities use more frequently as the preferred dividend can be accounted for when setting customer rates. ? The corporate investor is attracted to preferred stock as generally 70% of dividends can be excluded from taxes. ? Flexibility in paying dividends and an infinite maturity (similar to a perpetual loan) are significant advantages to the corporate issuer. ? The aftertax cost of preferred financing is greater than that of longterm debt financing to the corporate issuer. 2028 Common Stock and Its Features Basic Terms Authorized Shares Issued Shares Outstanding Shares Common Stock Securities that represen
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