The cost of a company's debt is determined by taking the A. Present value of the interest payments and princpal times one minus the tax rate B. Coupon rate of bonds times one minus the tax rate C. Yield on bonds issued minus the corporation's marginal tax rate D. None of the above answers are true 1. 2. The after-tax cost of preferred stock to the issuing corporation A. Is the same as the before-tax cost B. Is usually lower than the cost of debt C. Is dependent on the corporation's tax bracket D. None of the above answers are true The 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 3. 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 D. Common stock dividends are not tax deductible 4