Equity financing via common stock can be more expensive than issuing bonds because
A) common stocks must be insured.
B) there is more administration involved.
C) common stocks are backed by retained earnings.
D) common stock must be sold through a broker.
E) interest paid to bondholders is a tax-deductible business expense, but stock dividends are not tax-deductible.

Question

Quizplus · Accepted Answer

Interest paid to bondholders is tax-deductible, making the cost of financing through bonds lower than financing through common stock, which does not offer the same tax benefit.

Equity Financing Via Common Stock Can Be More Expensive Than