In general firms prefer to issue bonds instead of preferred stock because
1)debt is less risky to the firm
2)dividends are not tax deductible
3)effective cost of debt is cheaper

Name: In general firms prefer to issue bonds instead of preferred stock because 1)debt is less risky to the firm 2)dividends are not tax deductible 3)effective cost of debt is cheaper
Brand: Quizplus
Rating: 4.8 (51 reviews)

Question

Quizplus · Accepted Answer

Dividends on preferred stock are not tax deductible, whereas interest on debt is, making the effective cost of debt cheaper.

In General Firms Prefer to Issue Bonds Instead of Preferred