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A firm's founder sells equity to outside investors for the first time in the form of preferred ...

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A firm's founder sells equity to outside investors for the first time in the form of preferred ...

A firm's founder sells equity to outside investors for the first time in the form of preferred stock. In what way is this preferred stock most likely to differ from the preferred stock issued by an established public firm?

▸ It will give the holder seniority in any liquidation of the company.

▸ It will have a larger dividend.

▸ It will most likely not pay cash dividends.

▸ It cannot be converted into common stock.

Textbook

Fundamentals of Corporate Finance

Edition: 2^nd

Authors: Berk, DeMarzo, Harford

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joanne1718 Author

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