Answer:
b. False
Explanation:
Preferred stock refer to preference shares issued by an entity. Preference shares are just like common stock barring preferential payment for the repayment of capital as well as right to dividend payment.
The cost of preferred stock also denoted as [tex]K_{p}[/tex] = [tex]\frac{D}{NP}[/tex]
Dividend paid on preferred stock is not a tax deductible expense, unlike interest on debentures. A company pays dividend on preference shares after deducting interest expenses and taxes.
Dividend is an appropriation, not an expense and hence it is not tax deductible.
