From the viewpoint of the firm,preferred stock is both cheaper and less risky than bonds.

Question

Quizplus · Accepted Answer

This statement is false. Preferred stock is generally more expensive for the firm than bonds because preferred stockholders have the right to receive dividends before common stockholders, and those dividends are not tax deductible for the firm. Additionally, preferred stock does not have a set maturity date like bonds do, meaning the firm cannot simply repay the debt after a certain period of time. Preferred stock is also considered riskier than bonds because it is subordinate to debt in the event of bankruptcy.

From the Viewpoint of the Firm,preferred Stock Is Both Cheaper