The cost of preferred stock financing is generally higher than that of debt financing because unlikethe payment of interest to bondholders, the payment of dividends to preferred stockholders is notguaranteed, and interest on debt is tax-deductible whereas preferred stock dividend is not.

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Preferred stock financing usually carries a higher cost compared to debt financing due to the uncertainty of dividend payment and also because the interest on debt is tax-deductible while preferred stock dividend is not.

The Cost of Preferred Stock Financing Is Generally Higher Than