Unlike bonds, the cost of preferred stock to the issuing firm is the same on a before-tax and after-tax basis.This is because dividends on preferred stock are not tax deductible, whereas interest on bonds is deductible.

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Dividends on preferred stock are not tax deductible, whereas interest on bonds is deductible, therefore the cost of preferred stock to the issuing firm is the same on a before-tax and after-tax basis.

Unlike Bonds, the Cost of Preferred Stock to the Issuing