Why Is the Cost of Debt Normally Lower Than the Cost

question 66

Multiple Choice

Why is the cost of debt normally lower than the cost of preferred shares?

• A) Preferred share dividends are tax deductible.
• B) Interest is tax deductible.
• C) Preferred share dividends must be paid before common share dividends.
• D) Common share dividends are not tax deductible.

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Definitions:

Communication Adaptation Strategy

This involves adjusting a company’s communication methods to better fit the cultural and social norms of different target markets.

Global Markets

Worldwide trading environments where goods, services, and financial instruments are bought and sold.

Promotion Efforts

The activities and strategies used to increase awareness of a product or service, aiming to boost sales and customer engagement.

Product Adaptation

The process of modifying a product to suit the needs, preferences, or standards of a particular market or group of customers.