The cost of issuing preferred stock must be adjusted for taxes because preferred stock dividend payments represent a tax-deductible expense for the firm.

Name: The cost of issuing preferred stock must be adjusted for taxes because preferred stock dividend payments represent a tax-deductible expense for the firm.
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Question

Quizplus · Accepted Answer

Preferred stock dividend payments are not tax-deductible expenses for the firm, thus there is no need to adjust for taxes.

The Cost of Issuing Preferred Stock Must Be Adjusted for Taxes