1. A companys perpetual preferred stock currently sells for $122.50 per share, and it pays an $8.00 annual dividend. If the company were to sell a new preferred issue, it would incur a flotation cost of 5.00% of the issue price. What is the firm's cost of preferred stock? (Show your work.)

7.01%

6.87%

6.60%

5.98%

6.26%

2. In the fall of 2022, the Chase Corporation was involved in issuing new common stock at a market price of $40. Dividends last year were $2.00 and are expected to grow at an annual rate of 6 percent forever. Flotation costs will be $2.80. What is Chases cost of equity for the new issue? (Show your work.)