3. T he cost of equity capital in the form of new common stock will be higher than the cost of retained earnings because of A. The existence of taxes B. The existence of flotation costs C. Investor's unwillingness to purchase additional shares of common stock D. The existence of financial leverage Why is the cost of debt normally lower than the cost of preferred stock? A. Preferred stock dividends are tax deductions B. Interest on debt is tax deductible C. Preferred stock dividends must be paid before common stock dividends 4. D. Common stock dividends are not tax deductible