14. The treasurer of BioScience, Inc., is asked to compute the cost of fixed income securities for her corporation. Even before making the calculations, she assumes the aftertax cost of debt is at least 2 percent less than that for preferred stock.

Based on the following facts, is she correct?

Debt can be issued at a yield of 11 percent, and the corporate tax rate is 30 percent. Preferred stock will be priced at $50 and pays a dividend of $4.80.

The flotation cost on the preferred stock is $2.10.