Cost of Debt and 1\" Preferred Stock 9-8. Leo Bloom, the treasurer of a manufacturing company, thinks that debt {Y TM = 11%, tax rate = 40%) will he a cheaper option for acquiring mds compared to issuing new preferred stock. The company can sell preferred stock at $61 per share and pay a yearly preferred dividend of $8 per share. The cost of issuing preferred stock is $1 per share. Is Leo correct