cost of perpetual preferred stock is found as the preferred's annual dividend divided by the market price of the preferred stock No adjustment is needed for taxes because preferred dividends, unlike interest on debt, is not deductible by the issuing firm.

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Preferred dividends are not deductible by the issuing firm, so no adjustment for taxes is needed when calculating the cost of perpetual preferred stock.

Cost of Perpetual Preferred Stock Is Found as the Preferred's