Preferred stock is often called a hybrid security because it has some characteristict that are typical of debt and others that are typical of common equity . The following table les several characteristics of preferred stock. Determine which of these characteristics are consistent with debt securities and which are consistent with common stock Debt Common Stock Characteristic Its dividends are fixed in amount. O O It has a par, or face, value Failure to pay les dividend does not send the firm into bankruptcy. Purple Pigeon Bird Sted Company currently pays preferred stockholders a dividend of $1.50 per share and common stockholders a dividend of 21.00 per share. If the firm wants to raise the common stock dividend to $2.00 per share. It will also have to raise the preferred stock dividend to $2.00 per share. Wnich type of provision dons Purple Pigeon have in its preferred stock agreements? A call provision A sinking tund provision A participating provision For the same issuing firm and on the same day of issuance, which security tends to have a greater after-tax cost to the issuer, debt or preferred stock? Why is this the case? Debt, because its interest payments are not tax deductible Preferred stock, because its dividend payments are tax deductible Debt, because its interest payments are tax deductible Preferred stock, because its dividend payments are not tax deductible