If, instead the firm finances with debt, then, assuming the firm owes $100 dollars of interest to investors, its profits are now 0. Investors now pay taxes on their interest income, say $30 dollars. This implies for $100 dollars of profits before interest, investors got $70 dollars.
Raising Capital Using Monthly Income Preferred Stock: Market Reaction and Implications for Capital Structure Theory
Jun 22, 2000; James Rosenfeld We examine the impact of selling Monthly Income Preferred Stock (MIPS) on the common share prices of the issuing...