The principal disadvantage of preferred stock financing is ______.
A) its high after-tax cost as compared with long-term debt
B) the decrease in the firm's degree of financial leverage
C) the required payment of dividends
D) the reduction in control

Question

Quizplus · Accepted Answer

Preferred stock often has a higher after-tax cost compared to long-term debt because dividend payments are not tax-deductible, unlike interest payments on debt.

The Principal Disadvantage of Preferred Stock Financing Is ______