The cost of preferred stock A. increases as the beta of the firm increases. B. is equal to the annual dividend divided by the par value of the stock. C. is equal to the annual dividend divided by the present value of all the future dividend payments. D. varies as tax rates vary. E. is generally computed using the CAPM.

Option C

The cost of preferred stock is equal to the annual dividend divided by the present value of all the future dividend payments.

Explanation:

The preferred stock gives a solidified dividend each period. But dividends to preferred stocks are divided using after-tax income, as a sequence, these dividend payments do not produce any tax assumptions. The estimate of preferred stock is based on the reduced cash flow strategy.

The cost of preferred stock is the allowance of return demanded by owners of a company's preferred stock. It is determined by sorting the annual preferred dividend payment by the preferred stock's contemporary market price.