Corporations prefer bonds over preferred stock for financing their operations because

Question

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The after-tax cost of debt is typically lower than the cost of preferred stock, making it a more attractive option for corporations. Preferred stocks also require dividends, while bond interest rates may fluctuate but remain consistent over the life of the bond. Therefore, corporations tend to prefer bonds over preferred stock for financing their operations.

Corporations Prefer Bonds Over Preferred Stock for Financing Their Operations