The after-tax preferred yield for selten would be 17.19%. An alternative form of equity is preferred stock, which grants the owner the ability to both own a business and to receive income from its operations.
In comparison to common stockholders, preferred stockholders have a stronger right to distributions. When it comes to dividends, preferred shareholders have preference over common stockholders. Dividends can be paid quaterly or monthly and often yield more than regular stock.
Participating shares have the ability to pay additional dividends that are calculated in terms of common stock dividends or the industry's profits, and adjustable-rate shares specify certain elements that have an impact on the dividend yield. The board of directors of a firm has the discretion to decide whether to pay the dividend.
In the given question,
After-tax preferred yield = Before-tax preferred stock yield ×
[1 − (Tax rate) (Taxable amount of
dividends)]
= 0.18 × [1 − (0.15) (0.30)]
= 0.1719 or 17.19%
Therefore, 17.19% is the required after-tax preferred yield.
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