No The cost of perpetual preferred stock is found as the preferred's annual dividend divided by the market price of the preferred stock. adjustment is needed for taxes because preferred dividends, unlike interest on debt, is not deductible by the issuing firm. a. True b. False If a firm's marginal tax rate is increased, this would, other things held constant, lower the cost of debt used to calculate its WACC. a. True b. False The cost of equity raised by retaining earnings can be less than, equal to, or greater than the cost of external equity raised by selling new issues of common stock, depending on tax rates, flotation costs, the attitude of investors, and other factors. a. True b. False