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Dadoyan

  • 4 years ago

When I want to compute beta levered should I treat preferred shares as part of debt or equity?

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  1. business1
    • 4 years ago
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    since non-payment of dividend to preferred holders cannot force a company into bankruptcy must be treated as equity.

  2. Aswath
    • 4 years ago
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    Only if you want to treat preferred equity as equity all the way through. Actually, the best thing to do is to treat it as a third source of capital, with the preferred dividend yield as the cost.

  3. business1
    • 4 years ago
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    to calculate wacc under same logic, would it = (cost of debt x debt/capital) + (cost of common x common/capital) + (cost of preferred x preferred/capital)? if so, would you than also consider including into equation cost of convertible stock, cost of stock options, etc? thanks.

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