1. Preferred stock offers the issuing corporation and investors advantages and disadvantages. Which of the following statements describes a disadvantage for the issuer of preferred stock?
a. The after-tax cost of preferred stock is higher than the after-tax cost of debt
b. Nonconvertible preferred stock helps prevent the dilution of common equity.
2. Firms that invest in companites' preferred stock may exclude 70% of their preferred dividend income from taxes. TRUE or FALSE?