From a firm's perspective,preferred shares are at least as desirable as bonds because the firm is able to deduct preferred dividend payments for tax purposes like it can bond interest expenses.

Question

Quizplus · Accepted Answer

Preferred dividends are paid out of after-tax profits and are not tax-deductible for the firm, unlike bond interest expenses which are tax-deductible.

From a Firm's Perspective,preferred Shares Are at Least as Desirable