Consider the case of THC Endowment: THC Endowment is an institutional investor and owns preferred...
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Consider the case of THC Endowment: THC Endowment is an institutional investor and owns preferred stocks worth a 20% stake in Mitata Co. Mitata Co. paid out dividends of $189,000 to THC Endowment this year. Mitata Co. had issued perpetual preferred stock with a par value of $100 and pays a(n) 9.00% annual dividend. Investors' required return on Mitata Co.'s preferred stock is 12.06%, and the tax rate for both the companies is 25%. Based on the information given, calcule the following: Mitata Co. also issued preferred stock whose dividends varied with the interest rate on the T-bill. Though this feature was intended to keep the price of the stock stable, the fluctuations in the Treasury yields between the dividend rate change dates led to price instability, and several institutional investors reallocated their investments from this preferred stock to other short-term investments. What kind of preferred stock did Mitata Co. issue? Market auction preferred stock Adjustable rate preferred stock
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