The 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,are not deductible by the issuing firm.

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This is correct. The cost of perpetual preferred stock is calculated as the preferred's annual dividend divided by the market price of the preferred stock, with no adjustment needed for taxes. Preferred dividends are not tax-deductible for the issuing firm, unlike interest on debt.

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