The reason that we do not use an after-tax cost of preferred stock is
A) because preferred dividends are paid out of before-tax income.
B) because most of the investors in preferred stock do not pay tax on the dividends.
C) because we can only estimate the marginal tax rate of the preferred stockholders.
D) none of these choices are correct.

Question

Quizplus · Accepted Answer

The Answer of The reason that we do not use an after-tax cost of preferred stock is
A) because preferred dividends are paid out of before-tax income.
B) because most of the investors in preferred stock do not pay tax on the dividends.
C) because we can only estimate the marginal tax rate of the preferred stockholders.
D) none of these choices are correct.

The Reason That We Do Not Use an After-Tax Cost