Because preferred stock dividends are not tax deductible,the cost of preferred stock to the issuing firm is the same on a before-tax and after-tax basis.

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Preferred stock dividends are not tax deductible for the issuing firm, which means that the cost of preferred stock to the firm is higher on an after-tax basis compared to a before-tax basis. Therefore, the cost of preferred stock to the issuing firm is not the same on a before-tax and after-tax basis.

Because Preferred Stock Dividends Are Not Tax Deductible,the Cost of Preferred