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. Interest on bonds is deductible for tax purposes; dividends on preferred share issues are net. Assume that a company' can raise $100 million either
. Interest on bonds is deductible for tax purposes; dividends on preferred share issues are net. Assume that a company' can raise $100 million either by assuming bonds promising 12 percent annual interest or by issuing preferred shares. convertible into common shares promising 12 percent annual dividends. The firm expects to continue to have income (in
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