Question

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

Answer 1

since non-payment of dividend to preferred holders cannot force a company into bankruptcy must be treated as equity.

Answer 2

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.

Answer 3

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.