The use of debt is generally less costly to corporations than is preferred stock because interest is tax-deductible.

Name: The use of debt is generally less costly to corporations than is preferred stock because interest is tax-deductible.
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Interest on debt is tax-deductible, which reduces the overall cost of borrowing for corporations. In contrast, dividends paid to holders of preferred stock are not tax-deductible, making preferred stock a more expensive way to raise capital.

The Use of Debt Is Generally Less Costly to Corporations