Now figure out what your portfolio weights are by determining what proportion of your money is invested in each stock. Stock A has a beta of 1.2. Thus, it is underpriced. The beta of the company's debt is 0. The difference between preferred stock and common stock is that if a preferred dividend is missed, the company can be forced into bankruptcy.
Preferred stock is sometimes convertible into common stock.
Missing an interest payment can force a company into bankruptcy, but not a preferred dividend. The shareholders benefited. As the sole residual claimants, they got the entire benefit of the new tax shield. After tax cash flows are now higher and their claim is on after tax cash flows. You could also make an argument that the old bondholders are worse off because there are now twice as many senior claimants vying for the same pool of money.