Example 8: A company pays $20,000 in common dividends and $10,000 in preferred dividends. Calculate the after-tax cost of paying dividends. Example 9: X corp Ltd needs to raise $100,000 for a project. They can either issue bonds, with an annual interest rate of 6%, or issue 1,000 preferred shares at $100 each. The preferred shares would have an annual dividend of $4.00 per share. Assuming a tax rate of 40%, which option would be less expensive to the company