Why Is the Cost of Debt Normally Lower Than the Cost

question 41

Multiple Choice

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

• A) Preferred stock dividends are tax deductions.
• B) Interest on debt is tax deductible.
• C) Preferred stock dividends must be paid before common stock dividends.
• D) Common stock dividends are not tax-deductible.

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