For the same issuing firm and on the same day of issuance, which secruity tends to have greater after-tax cost to the issuer, preferred stock or common stock? Why is this the case?
A) Preferred stock, because the failure to pay its dividends will not put the issuer into bankruptcy
B) Common stock, because it represents a perpetuity, while preferred stock has a specific maturity date
C) Preferred stock, because preferred stock has priority over common stock in the payment of divideneds and the distribution of liquidated assets.
D) Common stock, because its dividends are tax deductible.