investing 3-4

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4. Which of the following is the best conclusion, given only the following information:
ZYX Corporation’s earnings after taxes have declined by 3.13% from the year earlier.
During the past three months, ZYX purchased from investors (retired) 7.5% of the
corporation’s outstanding preferred stock shares, which pay dividends at 5% of par.

A. ZYX Corporation’s net income decline is largely attributable to the expense it
incurred to purchase its preferred stock.

B. ZYX Corporation’s preferred stock purchase should enhance earnings after taxes next
year because it will earn 5% dividend income from its new preferred stock holdings.

C. ZYX Corporation’s purchase of preferred stock had no effect on the firm’s asset balance.

D. ZYX Corporation’s purchase of preferred stock improved its capacity to pay preferred
stock dividends.

I need help with this one.

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