Why Is the Cost of Debt Normally Lower Than the Cost

question 64

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 is tax deductible.
• C) Preferred stock dividends must be paid before common stock dividends.
• D) Common stock dividends are not tax deductible.

---

Definitions:

Operating Activities

Business actions directly related to the production and delivery of goods and services, generating the majority of a company's cash flow.